Premia Blue: Changes to Liquidity Pools
Premia Blue’s Interstellar Trading Competition is launching today. Each week we’ll focus on uncovering various features of Premia Blue. Here’s a little head start for our LPs!
With lessons learned from Premia v2 and inspiration taken from Uniswap v3…
Say hello to Concentrated Liquidity, Range Orders, and Smart Liquidity Management!
With these changes (and more,) Premia Blue is about to revolutionize the way liquidity providers interact with on-chain options!
Without wasting any more time, let’s jump right in — here’s everything that you, as a liquidity provider, must know about Premia Blue’s liquidity pools!
Check out our article on the changes Premia Blue brings traders here, and stay tuned for more articles covering the other features of Premia Blue, such as OTC-liquidity with the RFQ network!
Concentrated Liquidity
Inspired by Uniswap v3, we’ve taken a huge leap forward for DeFi options by introducing a unique feature for the market — concentrated liquidity.
Liquidity providers can create positions in specific option pools as concentrated range orders with defined upper and lower price bounds making their liquidity work harder.
This feature comes in addition to the already granular LP system of Premia Blue, where LPs get to define parameters such as the strike price and expiration date for the options their capital is used to underwrite.
Here’s what concentrated liquidity unlocks for LPs on Premia Blue:
- Use capital efficiently: LPs can manually set the range at which their liquidity will earn the most fees.
- Define your own risk: LPs get to set the exact options parameters they want to underwrite for, letting them define the exact range of risk they want to take on.
- Maximize liquidity utilization & trading fees: As LPs are incentivized to provide liquidity to the ranges that are most utilized, capital will be used to it’s maximum efficiency. LPs get the best fees, while traders get the most liquid markets possible.
Active liquidity providers can target a price range where they expect most trades to occur, maximizing their capital efficiency and earning potential.
Meanwhile, passive liquidity providers can still benefit from trading fees across a wider, less concentrated price range.
And it gets even more interesting! Let’s talk about Premia Blue’s Smart Liquidity Management and how it optimizes the fees generated for LPs by automatically managing range orders!
Smart Liquidity Management & Range Orders
As explained above, thanks to concentrated liquidity LPs on Premia Blue can set “range orders” that define the upper and lower bounds of the premiums their capital is used to underwrite.
Premia Blue takes this a step further, however. We’ve implemented a small piece of novelty called Smart Liquidity Management.
This functionality makes range orders similar to self-replacing limit orders — once an order is filled, an equal and opposite limit order is placed, and this process repeats if the replacement order is filled.
In less technical terms, Premia Blue’s smart range orders automatically place orders around your set range as the price fluctuates within it. This mechanism allows users to continuously earn the absolute maximum amount of fees!
Smart Liquidity Management brings out the best of Concentrated Liquidity — flexibility, profitability, and capital efficiency.
Split-user Accounting
We aren’t done yet! Split-user Accounting is a novel mechanism that allows Premia Blue to simultaneously monitor the long and short exposures of market participants.
In essence, Split-user Accounting clarifies the exposure of a given account and allows the protocol to monitor both sides of a market participant’s exposure. This greatly increases the safety of liquidity providers for a number of reasons:
- Long and short exposures are clearly separated — this clarity helps LPs manage their risk more efficiently
- Sophisticated traders who employ more complex strategies will find this system highly beneficial for managing and tracking their positions
- All transactions and positions are accounted for accurately
Remember, “split-user” doesn’t mean your account is divided. Instead, it’s a way of categorizing and tracking the different types of positions you have within the platform.
Join the Future of DeFi Options With Premia Blue!
Are you excited for the Interstellar Trading Competition, Anon?
Make sure you join our community on Discord & subscribe to email notifications on Medium to stay up-to-date with all the developments in Premia Blue and DeFi options!
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