SaucerSwap V2 is scheduled to launch on the date of this publication: Friday, November 17th at 21:30 UTC / 16:30 ET. This upgrade introduces a concentrated liquidity market maker (CLMM) protocol, an overhauled web-app, MetaMask support, an updated tokenomics model, and the Liquidity-Aligned Reward Initiative (LARI).
V2 liquidity provision opens at 21:30 UTC
Phase I of the updated tokenomics model is enacted between 21:30 and 23:30 UTC
Epoch 1 of LARI commences at 23:30 UTC
Swapping in V2 pools is enabled at 23:30 UTC
The key innovation in SaucerSwap V2 is concentrated liquidity. Unlike in V1, where liquidity is uniformly distributed across all possible prices (0, ∞), concentrated liquidity allows liquidity providers (LPs) to allocate capital within specified price ranges. For example, LPs can focus their capital around the peg of a stablecoin pair like USDC/USDT, leading to more efficient capital use and increased fee earnings.
Each liquidity position is uniquely represented by a non-fungible token (NFT). The flexibility of setting multiple positions means LPs can adapt to market conditions more effectively, concentrating their liquidity where it’s most likely to be utilized, and thus maximizing fee earning potential.
Key advantages include:
- LPs have the capacity to provide liquidity with up to 4,000x capital efficiency in comparison to SaucerSwap V1, thus receiving elevated fee earnings on their capital.
- Capital efficiency allows for trades to be executed with greatly reduced price impact in comparison to both centralized exchanges and stablecoin-focused AMMs.
- LPs have the opportunity to increase their exposure to desired assets and mitigate their downside risk.
- LPs have the ability to trade one asset for another by depositing liquidity into a price range entirely above or below the current spot price, emulating a fee-earning limit order that executes along a smooth curve.
A more comprehensive list of unique advantages can be found in the SaucerSwap documentation.
V2 offers a multi-tiered fee structure, allowing LPs to be appropriately compensated for taking on varying degrees of risk.
- 0.05% — Highly stable pairs: These are typically stablecoin pairs where both assets aim to peg their value to an external stable source, like the U.S. dollar.
- 0.15% — Moderately stable pairs: These can be a combination of a stablecoin and a relatively less volatile cryptocurrency. Their price can fluctuate, but not as wildly as more exotic pairs.
- 0.30% — Volatile pairs: Token pairs that have notable price swings within short time frames, but they are relatively well-known or have larger market caps.
- 1.00% — Highly volatile pairs: These pairs might include new or less-known tokens. Their prices can be highly unpredictable, and they often come with higher risk of impermanent loss.
Finally, traders are charged a fee based on the pool’s fee tier. As with SaucerSwap V1, 5/6 of the collected fee is allocated to LPs, and the remaining 1/6 is directed to the protocol. The protocol’s share is used for SAUCE token buybacks. The repurchased tokens are then distributed among the DAO and as rewards for single-sided staking. Unlike V1, LPs are rewarded directly in the tokens that constitute the pool. For example, if liquidity is provided to a USDC/HBAR pool, rewards are claimed as USDC and HBAR.
For a deeper understanding of concentrated liquidity, refer to the SaucerSwap documentation.
The SaucerSwap web-app has been completely redesigned to integrate both V1 and V2 functionality, along with analytics. The web-app introduces volatility strategies — preset price ranges specific to each fee tier, designed to suit various LP approaches for streamlined liquidity provision. It also introduces the depth chart, which is a graphical representation that displays the liquidity available in a specific pool across different price ranges. For guidance, consult the tutorials available in the SaucerSwap documentation or view them on YouTube.
MetaMask is fully integrated in the SaucerSwap web-app, enabling over 21 million daily active users to easily onboard and participate in Hedera DeFi for the first time ever. Furthermore, the core maintainers have added an HBAR faucet bot in the SaucerSwap Discord server to optimize the onboarding flow. More details can be found in the SaucerSwap documentation.
Updated Tokenomics Model
The issuance rate of new SAUCE tokens will decrease by 60% across a six-week period after the launch of SaucerSwap V2. This adjustment extends the SAUCE release schedule from 3 to 6 years, starting from August 2022. This updated tokenomics model is enabled by heightened capital efficiency of the CLMM, which is expected to boost trading volume and, consequently, fee generation for LPs. As a result, LPs will be less reliant on inflation-driven yields.
The SAUCE token’s inflation rate reduction and its reallocation in the updated tokenomics model are structured as follows:
- Total mint rate: 317.10 SAUCE / min
- Emitted to yield farmers (V1 incentives): 288.27 SAUCE / min
- Emitted to devcut: 28.83 SAUCE / min
- Emitted to DAO + LARI (V2 incentives): 0.00 SAUCE / min
Phase I (0–3 weeks):
- 20% reduction in inflation compared to current level
- Total mint rate: 253.68 SAUCE / min
- Emitted to yield farmers: 175.13 SAUCE / min
- Emitted to devcut: 23.06 SAUCE / min
- Emitted to DAO + LARI: 55.49 SAUCE / min
Phase II (3–6 weeks):
- 40% reduction in inflation compared to current level
- Total mint rate: 190.26 SAUCE / min
- Emitted to yield farmers: 117.47 SAUCE / min
- Emitted to devcut: 17.30 SAUCE / min
- Emitted to DAO + LARI: 55.49 SAUCE / min
Phase III (6 weeks and onwards):
- 60% reduction in inflation compared to current level
- Total mint rate: 126.84 SAUCE / min
- Emitted to yield farmers: 59.82 SAUCE / min
- Emitted to devcut: 11.53 SAUCE / min
- Emitted to DAO + LARI: 55.49 SAUCE / min
This updated tokenomics model is more sustainable, ensuring the longevity of the SaucerSwap protocol as Hedera continues to gain adoption. For more information, please see the tokenomics section of the SaucerSwap documentation.
Liquidity-Aligned Reward Initiative (LARI)
While SaucerSwap V2 has the potential to generate higher real yields for LPs, token incentives remain vital for bootstrapping liquidity, broadening the distribution of the SAUCE token, and reinforcing protocol governance.
The Liquidity-Aligned Reward Initiative (LARI) offers LPs token incentives for efficient liquidity contributions. This system addresses certain limitations of the SaucerSwap V1 yield farm. Notably, the obligatory staking of LP tokens, which transfers LP custody, is not optimal. Moreover, it is inefficient to reward LPs without accounting for their relative performance. Every reward token, such as SAUCE or HBAR, should not only incentivize liquidity, but also ensure its optimal use, with rewards reflecting this objective.
LARI addresses these design shortcomings. LPs do not have to stake their liquidity position NFTs to begin earning token incentives. Once an LP provides liquidity to a V2 pool, LARI is activated for their position. Furthermore, rewards are automatically distributed at the end of each 2-week reward period, or ‘epoch,’ greatly simplifying the UX and optimizing for gas efficiency.
Unlike the SaucerSwap V1 yield farm, which only supports SAUCE and HBAR rewards, LARI can be configured to emit any number of HTS tokens for each pool. This enables projects to tailor campaigns for their liquidity pools, rewarding LPs with their protocol token.
As a recap, the system functions by recording on-chain events and calculating rewards based on the duration a position remains within the range of the active tick. Rewards accumulate only while the position’s liquidity is in-range. At the conclusion of each 2-week epoch, participants automatically receive their rewards through an airdrop. A more detailed explanation can be found in the SaucerSwap documentation.
The entire ‘DAO + LARI’ allocation of emissions (55.49 SAUCE / min) will go towards LARI for the first four epochs (8 weeks). For subsequent epochs, half the allocation will go towards LARI, while the other half is retained by the DAO for future use.
V2 Pools and LARI Weights
The initial set of V2 pools and their LARI weights for Epoch 1 (Nov 17th 23:30 UTC — Dec 1st 23:30 UTC) are as follows:
The initial selection of V2 pools, and their associated LARI weights, has been carefully chosen to reduce liquidity fragmentation and enhance trading volume. This approach also ensures an appropriate pairing of tokens with their respective fee tiers and aligns incentives efficiently. As a reminder, the introduction of additional V2 pools will be subject to votes by the DAO.
During phase I of the updated tokenomics, farm rewards for certain V1 pools will end. Specifically, the pools affected are USDC[hts]/USDC, USDC[hts]/USDT[hts], and USDC[hts]/DAI[hts], as the majority of stablecoin liquidity is expected to migrate to V2. The revised farm weights, which will be implemented on November 17th between 21:30 and 23:30 UTC, can be found in the SaucerSwap documentation.
SaucerSwap V2 is scheduled for launch on the date of this publication, November 17th at 21:30 UTC / 16:30 ET, introducing a suite of enhanced features including a CLMM protocol and the Liquidity-Aligned Reward Initiative (LARI). Swapping in V2 pools will commence at 23:30 UTC, a strategic two-hour delay post-launch to stabilize markets during the initial bootstrapping period. Simultaneously, LARI will activate, enabling in-range liquidity providers to start accruing rewards immediately, to be distributed at the end of the 2-week epoch. Finally, the liquidity provider reward rate, or Fees APR, will be displayed after 24 hours of data is collected, ensuring accuracy and reliability in the metrics displayed on the front-end.