Internal Fungibility

The goal of disassembling.

The main goal of disassembling liquidity is we have to turn Concentrated Liquidity Positions from non-fungible assets into fungible ones. This allows us to interact with the re-deposited liquidity as one large pool instead of a million individual positions.

So counter-intuitively, the first thing to do is turn a re-deposited position into more positions. We withdraw the original LP position, split it into different nodes in Semi-Fungibility and redeposit it back as part of those node's LP positions. This turns all the different concentrated positions into similar buckets we can merge together. You can think of it like each individual AMM price tick is its own pool of liquidity, although the reality is far more complicated and gas-efficient.

Now that liquidity is pooled together, we can operate on positions in bulk. This means that whenever someone optimizes any range of liquidity, all other positions in that price range also get optimized. For example, whenever someone opens or closes a position in a given price range, all liquidity in that range is compounded. This is what ultimately allows us to move liquidity into different protocols and lend it around so cost-effectively.