SaucerSwap V2

SaucerSwap V2 is an automated market maker (AMM) based on Uniswap V3 smart contracts, adapted to work with the Hedera Token Service (HTS) through the Hedera Smart Contract Service (HSCS). For technical detail, refer to the V2 whitepaper.

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Concentrated liquidity

The hallmark feature of V2 is concentrated liquidity: liquidity providers (LPs) allocate capital within specific price ranges instead of across all possible prices $(0, \infty)$ as in V1. Key advantages:

• Up to 4,000x capital efficiency compared to V1, and therefore elevated fee returns on the same capital.
• Trades execute with greatly reduced price impact compared to spreading the same liquidity across an unbounded range.
• LPs can shape exposure to a preferred asset, or deposit entirely above or below the spot price to emulate a fee-earning limit order that executes along a smooth curve.

Take stablecoin pairs as an example. In V1, much of the liquidity between tokens like USDC and USDT sits idle across prices that will never trade. In V2, an LP can concentrate capital in a tight range — say 0.995 to 1.005 USDC/USDT — for far higher utilization and fee earnings. The trade-off: V2 liquidity becomes inactive when the spot price moves outside your range. Out-of-range positions earn no fees until the price re-enters the range, so active management matters more than in V1.

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Ticks

V2 inherits the Uniswap V3 concept of ticks, partitioning the continuous price range into discrete intervals. Each tick represents a 0.01% price change, and LPs select an upper and lower tick to define a position’s boundaries. As swaps move the spot price (the active tick), liquidity activates or deactivates at those boundaries.

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Fee tiers

V2 offers a multi-tiered fee structure so LPs are compensated for varying degrees of risk: Lower fee tiers use tighter tick spacing, allowing greater capital efficiency where prices are most stable. Higher tiers compensate LPs for the larger impermanent-loss risk of volatile pairs.

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Distribution of fees

Traders pay the pool’s fee tier on each swap. As in V1, 5/6 of the collected fee goes to LPs and 1/6 to the protocol; the protocol’s share funds SAUCE buybacks distributed between the Infinity Pool and the DAO. Unlike V1, LPs earn fees directly in the pool’s tokens — a USDC/HBAR position accrues claimable USDC and HBAR. $$\text{Fees APR} = \frac{\text{24h volume} \times (\text{fee} \times 5/6)}{L_{\text{bal}}} \times 365$$ where fee is the pool’s tier and $L_{\text{bal}}$ is the total liquidity aggregated over a balanced range. The interface displays the 7-day average.

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Volatility strategies

The web app offers preset price ranges per fee tier to streamline liquidity provision.

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Focused approach

Narrow ranges set around the peg (stable pairs) or daily volatility (volatile pairs). Highest fee capture while in range, highest risk of falling out of range.

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Balanced approach

Ranges sized to weekly volatility, with headroom for off-peg scenarios on stable pairs.

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Relaxed approach

Wide ranges sized to longer-term trends and extreme market conditions. Lowest maintenance, lowest fee density. Volatility strategies simplify liquidity provision but do not guarantee performance or reduce impermanent-loss risk. Actively managing positions is strongly advised.

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Common mistakes

• Setting a range and forgetting it. Out-of-range positions earn nothing. Check positions on the dashboard after large price moves.
• Chasing the narrowest range. Tighter ranges earn more per hour in range but fall out of range sooner; the worked example below shows both sides of this trade-off.
• Ignoring impermanent loss. A position that exits its range has fully converted into the less valuable token of the pair.

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Liquidity position NFT

Each V2 liquidity position is represented by a non-fungible token (NFT), because arbitrary price ranges make positions distinct and non-fungible. The NFTs use the HTS standard and embed the position’s details: token pair, fee tier, position ID, and min and max ticks. Each minted NFT also carries one of eleven handcrafted illustrations, chosen at random.

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Liquidity-Aligned Reward Initiative (LARI)

While V2 can generate higher real yields, token incentives remain vital for bootstrapping liquidity, broadening SAUCE distribution, and reinforcing governance. LARI is V2’s incentive system, and it improves on the V1 farm in two ways: positions are enrolled automatically — no staking or custody transfer — and rewards scale with how efficiently liquidity is deployed, not just how much. LARI can emit any number of HTS tokens per pool, so projects can run campaigns rewarding their own token alongside SAUCE or HBAR. Rewards are distributed automatically by airdrop at the end of each two-week epoch.

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How it works

1. Initialization — before each epoch, every pool is assigned a share of the epoch’s rewards. Current shares are published in LARI weights.
2. Monitoring — during the epoch, each position accrues “liquidity hours” for time its liquidity spends in the active tick, measured event by event.
3. Distribution — at epoch end, each position receives the pool’s rewards pro rata to its share of the pool’s total liquidity hours, delivered by airdrop.

Liquidity-hours math

For a position of size $L$ on the tick interval $[a, b]$ containing the active tick, its liquidity at that tick is:$$L_{\text{pool,pos}} = \frac{L}{b - a}$$Between consecutive pool events (swaps, mints, burns) separated by $\Delta t_i$ hours, the position accrues:$$S_{\text{pool,pos},i} = L_{\text{pool,pos}} \times \Delta t_i$$Total liquidity hours for the epoch sum across all $n$ intervals in which the position was active:$$T_{\text{pool,pos}} = \sum_{j=1}^{n} S_{\text{pool,pos},j}$$The position’s reward is its share of the pool’s allocation $R_{\text{pool}}$:$$R_{\text{pool,pos}} = \frac{R_{\text{pool}} \times T_{\text{pool,pos}}}{T_{\text{pool}}}$$Liquidity hours are computed to the second. Positions that fall out of range after a swap are credited for half of that interval. The estimated reward APR shown in the interface is $R_{\text{pool}} \times 26.07145 / L_{\text{pool}}$, annualizing the 14-day epoch.

Worked example: narrow vs wide range

Alice and Bob both provide $10k to the USDC/USDT pool (0.05% fee, tick spacing 10), which has 100,000 SAUCE of LARI rewards this epoch.

• Alice: wide range, $0.95 to $1.05 — 1,000 ticks.
• Bob: narrow range, $0.9995 to $1.0005 — 10 ticks.

Assume the price stays inside Bob’s range all epoch. Liquidity at the active tick:$$L_{\text{Bob}} = \frac{10{,}000}{10} = 1{,}000 \qquad L_{\text{Alice}} = \frac{10{,}000}{1{,}000} = 10$$Over one 336-hour interval, Bob accrues 336,000 liquidity hours and Alice 3,360. Rewards:$$R_{\text{Bob}} = \frac{100{,}000 \times 336{,}000}{339{,}360} = 99{,}010 \qquad R_{\text{Alice}} = \frac{100{,}000 \times 3{,}360}{339{,}360} = 990$$Bob’s focused range out-earns Alice’s by 100x — but only because the price never left his 0.1%-wide range. Over a real 14-day epoch that is unlikely, and an out-of-range Bob would earn nothing while Alice kept accruing.

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Reward funding

LARI rewards are funded from the DAO’s share of Masterchef emissions, plus any tokens that partner projects commit to campaigns. The DAO sets each epoch’s total allocation and per-pool weights through governance; see LARI weights for the live epoch and past distributions, and SAUCE tokenomics for the emission schedule.

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Next steps