Camelot V2 — Concentrated Liquidity, UI overhaul & High-Efficiency Farms
We are proud to introduce Camelot’s new concentrated liquidity AMM and v2 upgrades ⚔️
By leveraging Algebra’s V2 custom implementation, we can build a user-focused product that unlocks highly efficient trading for the entire Arbitrum ecosystem.
V2 will launch in three stages, with the first stage being deployed on Saturday 8th, April:
- Stage 1 — Concentrated liquidity AMM release
- Stage 2 — UI overhaul
- Stage 3 — Concentrated liquidity high-efficiency farms
The initial goal for Camelot was to build a DEX that supports builders with sustainable infrastructure and to move away from being just a ‘yield-farm’. The first iteration of our AMM combined x*y=k and x³y+y³x=k for volatile and stable pools, respectively. Our entire focus has been on supporting native builders, which means building liquidity for longer-tail and more volatile tokens, making them a better fit for the standard Univ2 pools. While less efficient than concentrated liquidity, our original AMM created a solid foundation to allow Camelot to flourish and become the ecosystem hub. The efficiency of our first AMM was improved with directional fees, a more effective rewards structure through spNFTS & Nitro pools, and our emphasis on sustainable emissions.
Now that we have cemented our position as the native DEX, it’s an appropriate time to unleash even further efficiency gains. Camelot is, above all, designed to support Arbitrum protocols, naturally making our approach to implementing concentrated liquidity focused on how we can build the best product possible that native users, traders, and builders want to use. The complexity of concentrated liquidity has been one of the most significant barriers to broader adoption, especially for smaller users that aren’t sophisticated liquidity providers and protocols that don’t have the resources to manage positions or bootstrap their pools actively.
Instead of spending significant time and resources to rewrite a clAMM from scratch, we leveraged the highly efficient and feature-rich Algebra’s v2 codebase, allowing us to focus on making the AMM fit within our existing infrastructure. By doing this, we’re able to deploy an AMM that is provably efficient while much more user-focused and suited to the specific needs of Camelot and the broader Arbitrum ecosystem.
Algebra’s v2 AMM
Algebra’s v2 is a tick-based concentrated liquidity AMM that works like Univ3, adding several custom and highly efficient features. Among its general performance improvements on the vanilla Univ3 codebase, some major enhancements have been implemented:
Directional & dynamic volatility fees
The fees of each pool will automatically adjust to the underlying volatility, adding significant efficiency gains. We can also set these volatility-based ranges separately depending on the buy and sell direction. Therefore, the fees for each pool will be highly specific to the market, further boosting fees and volume.
In periods of low volume, fees will adjust lower accordingly, and likewise, when the market is significantly volatile, the fees will increase to reflect it. This allows for much more effective value capture for LPs, where fees more accurately reflect the risk an LP takes.
While not being supported right from our launch, the AMM will provide users with the automatic closing of orders at a specific price without needing an intermediary. This feature is designed to reduce price impact and provide new opportunities for market makers and traders, making the AMM even more efficient and driving volume and fees for the protocol.
The AMM will also support rebasing tokens — tokens with elastic supply. The unaccounted excess balance (from both rebase or sending tokens directly to a pool address) is shared among active liquidity providers as a fee. This feature does not exist on any other CLAMM.
Custom tick spacing
Algebra’s V2 also gives the capacity to configure every pool with its own tick spacing settings, unlocking extreme flexibility for every pair through tailored parameters, allowing it to capture more volume and fees thanks to better efficiency.
V2 overview: https://medium.com/@crypto_algebra/the-algebra-protocol-v2-updates-a-step-forward-d863181d10d8
Increasing efficiency & abstracting complexity
One of the biggest challenges we wanted to address was to make our concentrated liquidity AMM more user-friendly and accessible for native builders. While existing concentrated AMMs offer efficient trading, they’re mostly only used by sophisticated traders as they require a deeper understanding and more active participation. Most protocols we work with choose Univ2 for their liquidity because it’s much easier to manage and build community LPs and is the most familiar option. By making concentrated liquidity more accessible, we can achieve significantly more efficient liquidity for even the longer-tail tokens of Arbitrum native protocols.
To make concentrated liquidity a more user-focused product, we’ll integrate the AMM within our existing spNFT and Nitro pool infrastructure. This will mean custom and focused reward structures built on the already efficient tech. This combination is how we will abstract the complexity for the average user and allow protocols to leverage the AMM much more effectively.
The average user and passive LP will consequently be able to achieve the same efficiency gains as a sophisticated & active trader. Not only will this allow everyday users to leverage the power of concentrated liquidity, but it will also provide protocols with a way to bootstrap their pools. As we’ve seen with all DEXs, incentives are vital to grow TVL and volume and generate fees. By taking this new novel approach to concentrated liquidity farming, we can ensure that incentives are focused in the most effective way possible, leading to higher volume and fees. This also opens up significant opportunities for our future gauges implementation on xGRAIL, which will also include concentrated liquidity farms.
V2 UI upgrades
Since launching, we’ve worked on several improvements to make farming, managing positions, and tracking earnings more user-friendly and streamlined. On top of all the changes related to concentrated liquidity, we’ll also release a v2 update for our UI. We are excited that this update will provide users with an improved experience that combines LPs, spNFTs, and Nitro pools into a more cohesive flow. As mentioned above, this will allow us to roll out our future concentrated liquidity farms, which are integrated within our existing spNFT and Nitro pool layers. In addition, we’ll also be rolling out specific pages for our Round Table protocols, allowing each partner to have a dedicated space on the app to display their farms and other relevant information. We’re confident this will expand our mission to make Camelot the “front-end of Arbitrum”.
The code for Algebra’s v2 has been extensively tested and audited, and our future implementations are under review by Paladin. They will be deployed in the weeks following the concentrated liquidity release. We will release the AMM (Stage 1) on Saturday 8th, April. This will allow us to slowly bootstrap liquidity, focusing on our core deepest pairs and allowing the Camelot community to use it organically without incentives.
Following the launch of the AMM, we will release the v2 update for the UI (stage 2) and the farms for concentrated liquidity (stage 3). The UI update will allow users to have a much smoother experience across farms, Nitro pools, and managing their positions. The concentrated liquidity farms will enable us to bootstrap liquidity and volumes significantly for the new AMM.
We’re on the path to being a sustainable protocol, and we’re confident that concentrated liquidity will add to the strong foundation we’ve built since launching in November 2022. We’re excited that our approach to concentrated liquidity will unlock significant efficiencies for the entire ecosystem and, most importantly, generate more volume and fees for Camelot. By introducing a highly-efficient AMM, a v2 update to the UI, and user-friendly concentrated liquidity farms, we can push the boundaries of what it means to be an ecosystem-focused DEX. Ultimately, Camelot’s value is distributed back to xGRAIL holders through dividends and other plugins. We’re also proud to announce that, as previously mentioned, the initial airdrop for GRAIL public sale participants will be distributed following the AMM launch. We appreciate that this took slightly longer than expected, but we’re excited to deliver it to our earliest supporters.