Liquidity
Add liquidity and earn yields when users trade - https://upheaval.fi/liquidity
Upheaval v3 Liquidity Providers form positions by depositing token pairs into a specific, narrow price range rather than across the entire price spectrum. This concentrated liquidity allows LPs to use their capital more efficiently, earning higher fees for trades that occur within their chosen range. When the market price moves outside of the LP’s set range, their liquidity becomes inactive and earns no fees until the price moves back into that range.
Step-by-Step Breakdown of How It Works:
Select a Token Pair
The LP chooses a pair of HyperEVM tokens they want to provide liquidity for, like HYPE/USDT0.
Choose a Price Range
Upheaval v3 allows LPs to specify a very narrow price range.
Deposit Tokens
The LP deposits the two tokens into the pool within that selected price range.
Earn Fees
When a trader makes a swap within the price range of the LP’s position, the LP earns a share of the trading fees. The more liquid the pool is at a given price, the more efficient it is for traders, leading to deeper liquidity.
Monitor and Adjust
The LP’s position remains active and earning fees only as long as the market price of the tokens stays within their chosen range.
If the price moves outside the range: The LP’s liquidity becomes “out of the market” and no longer earns fees.
If the price moves back into the range: The LP’s liquidity becomes active again, and they can start earning fees.
Key Concepts
Concentrated Liquidity
The core feature of v3, allowing LPs to focus their capital into a smaller price range for more efficient capital use.
Price Ranges
LPs define specific minimum and maximum prices (ticks) within which their liquidity will be active.
Fee Tiers
LPs can choose from different fee tiers for a given pool, such as 0.25%, 1.00% etc, to match the expected volatility of the token pair.
Capital Efficiency
LPs can achieve higher returns with less capital compared to v2, but this comes with the increased risk of their position being inactive if the price moves out of range.
Providing liquidity is not without risk, as you may be exposed to impermanent loss.
Impermanent loss (IL) happens when you provide liquidity to a decentralized exchange (DEX) and the price of the tokens you deposited changes compared to when you first added them.
Because liquidity pools use automated market maker (AMM) formulas (like constant product: x·y = k), your tokens are constantly rebalanced as traders swap in and out. This means you might end up with more of the token that went down in value and less of the one that went up.
If you had just held the tokens in your wallet (“HODL”), your portfolio might be worth more than what you can withdraw from the pool. The difference between these two values is the impermanent loss.
It’s called “impermanent” because:
If the token prices return to the same ratio as when you deposited, the loss disappears.
But if you withdraw while prices are still diverged, the loss becomes realized.
Liquidity providers are compensated with trading fees (and sometimes extra incentives), which can offset or even exceed impermanent loss.
Example (simplified):
You provide HYPE and USDC at $10/HYPE.
Later, HYPE goes to $100.
The pool rebalances, so you end up holding less HYPE and more USDC.
Compared to just holding HYPE+USDC, your LP position is worth less — that’s impermanent loss.
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