Can Real Yield Replace Token Incentives for LPs?

None of the information contained here constitutes an offer (or solicitation of an offer) to buy or sell any currency, product or financial instrument, to make any investment, or to participate in any particular trading strategy.

DeFi protocols have relied on the distribution of native tokens to incentivize liquidity providers (LPs). In a previous post, we delved into traditional liquidity incentives and the utilization of vote-escrow tokens. Now, we shift our focus to a fresh approach that has captured the attention of DeFi enthusiasts: concentrated liquidity methods.

[ Read : TVL is a Meme ]

High Utilization and Capital Efficiency: A Path to Higher Returns for LPs

In traditional liquidity pools, assets are often spread across a wide range of price levels, leading to underutilized capital. Concentrated liquidity has emerged to solve this issue by focusing liquidity within specified price ranges. This approach has several advantages that lead to higher returns for LPs:

Focused Liquidity: By concentrating liquidity within certain price ranges, LPs can ensure that their capital is used where it’s most needed. This focused approach makes every dollar of liquidity work harder, leading to more trading volume relative to the amount of capital provided.

Capital Efficiency: Traditional pools require more capital to achieve the same level of liquidity within a specific price range. With concentrated liquidity, LPs can provide the same depth with less capital, making their investment more efficient. This efficiency translates into higher returns, as LPs earn more fees per dollar invested.

Tailored Strategies: Concentrated liquidity allows LPs to customize their exposure based on their risk tolerance, market views, and investment strategies. New AMMs can allow users to tightly configure directional bets, order types.

Less Dilution of Fees: In traditional pools, fees are often diluted across a wide range of price levels. Concentrated liquidity enables LPs to earn fees specifically within their chosen price ranges, thereby reducing dilution and increasing returns.

Adaptation to Market Conditions: Concentrated liquidity protocols allow LPs to adjust their positions in response to market changes. This flexibility enables LPs to continuously optimize their positions, capturing more fees and enhancing returns. They are also becoming more gas efficient to allow traders to update orders more frequently.

A Shift from Token Emissions to Native Yield

The shift towards concentrated liquidity and away from high token emissions for LP incentives signifies a new chapter in DeFi’s incentive structure. The spending of protocol funds on tokens is becoming less prominent as projects look for more efficient and cost-effective ways to promote liquidity. Concentrated liquidity methods are enabling LPs to earn high native yield, bringing a new era of possibilities.

Let’s explore some of the most promising and intriguing concentrated liquidity methods out there:

Bunni: Incentivizing Concentrated Liquidity Ranges

By allowing projects to incentivize concentrated liquidity ranges on Uniswap v3, Bunni offers a new way for projects to boost liquidity.

  • veToken Mechanism: Bunni introduces a special veToken mechanism where protocols can come with bribes to add LIT token emissions to their liquidity ranges. This mechanism makes it a suitable platform for different projects to boost their liquidity.
  • High Fees in Concentrated Ranges: With higher fees in concentrated ranges, Bunni proves to be quite favorable for stablecoin protocols. The LPs can obtain high native yield, making it a lucrative option.

Maverick: Customized Liquidity Positions

Maverick (Mav) offers a concentrated liquidity DEX that allows users to create tailored liquidity positions based on ranges and directional orders.

  • Capital Efficiency: Mav’s liquidity is highly capital efficient due to the concentrated aspect, which enables LP fees to be high on even small positions.
  • Stablecoins and Staked ETH Derivatives: This efficiency has led some stablecoins and staked ETH derivatives to utilize Mav’s ranges for their LPs. Rather than adding high token incentives, the LPs are attracted by the high native fee yield on the position.
  • Boosting Specific Position Types: Mav’s construction allows protocols to “boost” specific position types, further adding to the protocol’s appeal.

Integral SIZE

At Integral, we are anticipating the new needs of LPs and DEX traders alike. Already, Integral offers one of the most capital efficient venues for LPs, yielding high utilization multiples on a daily basis.

For traders, there is a low-cost venue to get the best fill on large orders.

We are looking forward to continuing to optimize our DEX with upcoming improvements to gas costs and additional order types for traders.

The next features will also involve ways for projects to take advantage of Integral SIZE’s capital efficient swaps to provide supporting liquidity for native tokens.


These methods offer a glimpse into the future of DeFi, where capital efficiency and returns become the main driver of where LPs decide to park capital.

Stay tuned to our blog, as we continue to explore these fascinating developments. Whether you’re an investor, a developer, or a casual observer, this new wave of incentives is something you won’t want to miss.


Integral Insights


July 3rd, 2024

Integral Insights Jun ‘24

We are excited to announce that the distribution of this grant has begun in June. A significant portion of the grant is being allocated as liquidity incentives to our valued users.


June 13th, 2024

Integral Insights May ‘24


June 6th, 2024

How to Participate in the Arbitrum Rewards Campaign

125,000 $ARB will be dedicated to a 3-month liquidity mining program focusing on store-of-value (SoV) token pairs such as WETH-USDC, WETH-USDT, WETH-wstETH, and WETH-ARB.


June 6th, 2024

Unlock High Yields with Integral's $225K ARB Grant from Arbitrum Foundation – Join Our Liquidity Mining Program Today

Integral has been awarded a significant grant of 225,000 $ARB from the Arbitrum Foundation under the Long-Term Incentive Pilot Program (LTIPP). This funding will drive the growth and adoption of Integral on Arbitrum, benefiting the entire ecosystem. With 125,000 $ARB dedicated to a 3-month liquidity mining program focused on key token pairs like WETH-USDC and WETH-ARB, liquidity providers can enjoy high yields and reduced trading costs. Additionally, 100,000 $ARB will be allocated to incentivize integrations with aggregators, solvers, and vaults, fostering a more interconnected DeFi environment. Join us and be part of this exciting journey to enhance liquidity and trading on Arbitrum!


May 9th, 2024

Integral Insights April ‘24

The combined average daily volume across Ethereum and Arbitrum is now at 8.8 million USD, a remarkable 22% increase compared to last month.


April 25th, 2024

Introducing New Pool Analytics: Elevate Your Liquidity Provision Experience

A standout feature in our latest update is the "LP vs Hold" tab, which provides a comparative analysis of various holding strategies against Integral's LP positions.


April 1st, 2024

Integral Insights March ‘24

We achieved several important milestones, including a new all-time-high daily volume for Arbitrum and the addition of four new pools on the Ethereum mainnet.


March 4th, 2024

Integral Insights February ‘24

Another milestone was reached on February 21st when Integral processed over $2 billion in cumulative volume.


February 1st, 2024

Integral Insights: January ‘24

Our initial launch with the ETH-RPL pool was a success, quickly elevating us to the second most utilized liquidity pool for this pair’s trading.


January 17th, 2024

Is Liquidity Fragmentation Really That Bad?

When the token evolves into a store of value, it attracts outside traders, focusing on trading costs and slippage. This is when concentrated liquidity truly shines.


January 2nd, 2024

2023 Review

At Integral, our focus remains on developing a sustainable product for on-chain trading, serving both traders and liquidity providers.


December 12th, 2023

Integral Now Rewards Liquidity Providers with Trading Fees on Ethereum Mainnet

This enhancement enables liquidity providers (LPs) to directly receive a portion or all trading fees from Integral pools.


December 6th, 2023

Integral Insights: November ‘23

During November, Integral processed an average of approximately 6 million in volume with around 1.5 million in TVL. The system’s overall capital utilization sits at around 350%. It is the 10th most used DEX on Ethereum.


November 28th, 2023

Integral Now Rewards Liquidity Providers with Trading Fees

This enhancement enables liquidity providers (LPs) to directly receive a portion or all trading fees from Integral pools.


November 15th, 2023

How Do University Blockchain Societies Gain So Many Votes?

Explore how university blockchain societies like FranklinDAO and Michigan Blockchain have grown into influential players in DAO governance, utilizing delegated votes and strategic partnerships to shape the future of DeFi protocols like Uniswap, Compound, and Aave.


November 6th, 2023

Integral Insight: October ‘23

We give an update for our work in October and highlight a profitable LP position from a long-term user.


October 26th, 2023

Understanding the Stakes in Lido’s Growing Share of Staked ETH

The community is arguing whether a protocol may have too much control over the Ethereum network. Lido controls a large percentage of staked ETH, which could have consequences for the network’s future security and neutrality.


October 14th, 2023

Changes to Staking and Farming

Looking back at our progress so far and to the future with new updates to staking and farming.


October 11th, 2023

Integral Insight: September ‘23

We give an update for our work in September with utilization going up on higher volume for our new pools.


October 11th, 2023

The Hottest Narratives of the Summer

What were the hottest narratives of the summer? Our DeFi research team delves into the growth of trading bots, RFV traders and more in this overview.