Dogechain Explains - v2 vs v3 AMMs 🤖 With major DEX @QuickswapDEX offering both v2 and v3 versions of their AMM on #Dogechain, many wonder about the differences between these protocols. 🤔 This post should help you understand both AMM versions' workings and learn their differences. 💧 A v2 DEX's primary function is to allow users to build up trading pools between any token and a wide range of assets. This liquidity allows them to trade said tokens for each other When LPs provide liquidity to v2, it is distributed evenly along the price curve. ☯️ 0️⃣ ->♾However, while this allows handling price ranges between 0 and infinity, it makes the capital inefficient for LPs. Assets are usually traded within a certain price range, not taking advantage of 99% of the capital, never generating fees. 💸 🧃 v3 introduces concentrated liquidity, where LPs can choose the price range where they wish to provide liquidity. The protocol creates a price curve for every LP, allowing them to generate fee rewards when assets trade in that particular range. 💰 🪙 v3 equally allows users to provide a single token as liquidity in a custom price range above or below the current market price. This is in contrast to v2s which will require a pair of tokens to be added to the LP. That said, even though v3 shows clear advantages, it hasn’t been fully adopted because it requires more active liquidity management. 😓 As such, v2 remains a major player for users trading exotic pairs 🍸, while v3 has become the go-to solution for blue chip projects. 🫐 ♻️

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