How Pools Work

v3 Pools

Mechanics

Liquidity is not spread across the whole curve. Instead, providers choose specific price ranges defined by ticks (discrete price intervals).

The pool's current tick reflects the current price. Only liquidity assigned to the active tick range participates in swaps and earns fees.

After each swap or liquidity change:

• token reserves adjust

• the active tick may shift

• fees are calculated and recorded for relevant positions

LP Behavior

Each position stores a lower tick, upper tick, and liquidity amount, defining the exact price interval where it is active.

Fees accrue only when the market price stays inside the selected range. When active, the provider earns a larger share of fees relative to the capital committed.

When the price exits the range, fee accrual stops until the price re-enters it. The position remains safe but becomes inactive.

This model offers higher potential returns per unit of capital but requires range selection and occasional position management.

Benefits:

• Lower slippage for traders due to deeper liquidity near the active price

• Tighter spreads because capital is concentrated where trades actually happen

• Higher capital efficiency for LPs who manage their ranges effectively

v2 Pools

Mechanics

The v2 model follows the classic constant-product AMM design.

Each pool holds two assets. All pricing and swaps are determined by the relative balances of these two reserves.

The pool maintains the invariant x * y = k. Swaps change the reserves, and the price adjusts automatically to keep the product constant.

Every trade adds a fixed 0.30% fee directly into the pool. As liquidity grows, LP token value increases because fees accumulate inside the reserves.

LP Behavior

Liquidity is distributed evenly across the entire price curve. Users receive LP tokens that represent their proportional share of the pool. As the pool grows from trading fees, the value of these LP tokens increases.

Fees accumulate passively: every swap routed through the pool generates fees, which are distributed to all LPs according to their share.

Liquidity is always active. Because it is spread across the full price range, the position participates in all trades regardless of the current market price.

This model suits users who prefer passive, set-and-forget liquidity with no need to manage price ranges.

Summary

• v3 provides targeted, efficient liquidity concentrated around chosen price ranges.

• v2 provides continuous, passive liquidity across the entire curve.

Both operate fully on-chain and permissionlessly inside Hypertrade DEX, allowing users to participate without intermediaries.