What are projects doing now
Fig 1 — Summarising what projects are doing now to launch tokens. Most projects use Uniswap V2 because it is good for decentralization and liquidity mining, and guarantees tokens will always be tradable; but they miss out on capital efficiency, which is V3’s biggest benefit. To capture capital efficiency, projects can directly incentivise a V3 pool using a V3 staker, or use an active liquidity manager, but they sacrifice tradability, liquidity mining, and decentralization. With Alpha Pro, project can capture V3’s capital efficiency in a decentralized manner, without sacrificing V2’s key benefits such as tradability and liquidity mining.
Because of the challenges, many projects:
- This means projects are missing out on the benefits of V3 to provide deeper liquidity and better price discovery.
Choose a 3rd party liquidity manager to manage V3 liquidity on their behalf. This means:
- Limited scope to decentralize, because their liquidity is being managed off-chain.
- Projects run the risk of having no tradable tokens if a V3 range is poorly chosen, if it’s not updated frequently, or if the price is too volatile.
- This means there will be a smaller and less efficient markets for the tokens, and will not reduce the risk of a few wallets extracting most of the rewards.
- V3’s capital efficient architecture also introduces a number of inconveniences for liquidity mining campaigns.