SODAX Pool uses concentrated liquidity, which allows you to choose the specific price range over which your assets will be active. This is a key difference from earlier liquidity pool models, where asset liquidity was spread evenly across all possible prices from zero to infinity.
🧠 Concentrated liquidity makes pools more efficient. By allowing providers to focus their capital within a specific range where trades occur, the pool can offer deeper effective liquidity where it is needed most, rather than spreading it thinly across prices that may never be reached.
How It Works
When you provide liquidity to the SODA/xSODA pool, you select a minimum and maximum price for your position. Your liquidity will only be active, and earning rewards, while the current trading price falls within this range.
Narrow Ranges: Concentrating your liquidity over a smaller price window means your capital is utilized more intensively when the price is within that range. This typically results in a higher share of rewards, but it requires more regular monitoring to ensure the trading price stays in range.
Wide Ranges: Spreading your liquidity over a broader window means it will remain active across a wider set of market conditions. While the rewards per unit of capital may be lower, this approach is better suited for a more passive approach to liquidity provision.
What Happens If the Price Leaves Your Range?
If the market price of xSODA relative to SODA moves outside your selected range, your liquidity will no longer be active. This means you will stop earning rewards until the price returns to your range or you adjust your position.
Depending on which direction the price has moved:
Price moves above your range: Your position will convert entirely to one asset of the pair.
Price moves below your range: Your position will convert entirely to the other asset of the pair.
In either case, you would need to rebalance your holdings to provide effective liquidity again.
💡 New to concentrated liquidity? Start with a wide range. If you are unfamiliar with managing price ranges, a wider range reduces the chance of your position going out of range and is easier to manage over time. You can always narrow your range later as you become more comfortable.
Choosing the Right Range
There is no single "correct" range. The right choice depends on your goals and how actively you want to manage your position:
Active managers may prefer tighter ranges to maximize capital efficiency and rewards, checking in regularly to adjust as the price moves.
Passive providers may prefer wider ranges for a more hands-off experience, accepting potentially lower rewards in exchange for less frequent management.
Need Help?
If you have any further questions about price ranges or need assistance, visit our Support Center for more articles and resources, or contact our support team via the button in the bottom right.