Introduction to Liquidity Book

Liquidity Book is a new type of Automated Market Maker (AMM) that powers swaps on Merchant Moe. Liquidity Book drastically improves the token trading experience, simultaneously reducing costs for traders and amplifying fee earning potential for liquidity providers while also requiring less capital.

Originally designed by Moe's cousin, Trader Joe, Liquidity Book has industry-leading innovations that can't be found anywhere else in DeFi. Its features include:

  • Zero Slippage: Traders can swap tokens with zero slippage within bins.

  • Surge Pricing: Liquidity Providers earn additional dynamic fees during high market volatility.

  • High Capital Efficiency: Liquidity Book can support high volume trading with low liquidity requirements.

  • Flexible Liquidity: Liquidity Providers can build flexible liquidity distributions according to their strategy.

How does Liquidity Book differ from Uniswap V3

Both Liquidity Book and Uniswap V3 are concentrated liquidity AMMs with some subtle differences:

  • Price ranges are discretized into bins instead of ticks

  • Bins use constant sum invariant instead of constant product

  • Bin steps (or tick sizes) can be more than 1 basis point

  • Liquidity is aggregated vertically instead of horizontally

  • Liquidity positions are fungible

  • Liquidity positions are not restricted to uniform distribution across its price range; they can be distributed in any shape desired

  • Swap fees have fixed + variable pricing, which allows the AMM to charge more fees when the market experiences high volatility.

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