Bayesian Auto-Compounding

We're one of the only auto-compounders for concentrated LP positions. Some protocols misrepresent auto-compounding and over promise on its benefits so let's dive in and demystify what actually happens with auto-compounding, when you should use it, and what makes ours so special.

The Basics

Auto-compounding means taking your fees and reinvesting it back into your LP position. The benefit is your subsequent fee earnings are great because your LP position grew. But while your original position does not change, just know that because your fees have become liquidity they'll also experience IL and the fluctuations in your position's value will also grow.

Most auto-compounders work be withdrawing fees for a single position, and reinvesting the liquidity. This happens one by one and as a result protocols have to charge high fees to incentivize people to compound others' positions. When they reinvest that liquidity, they reinvest it over the entire liquidity range.

Bayesian

The first big upgrade to auto-compounding that we do comes from realizing that not all ticks in the liquidity range are useful. We should instead put our reinvested fees into the most useful pieces of liquidity, and if we had to guess which price ticks will earn the most going forward the best guess is the price tick that just earned fees! This is a bayesian approach to distributing liquidity and dramatically improves the yield earnings and capital efficiency of auto-compounded liquidity.

Pooled liquidity

Under the hood, we're actually able to combine millions of positions into fungible pieces of liquidity and as a result, this means when we compound concentrated liquidity, we can actually compound all overlapping position in that liquidity range in a single call. So every time someone uses our protocol, they actually compound everyone else's position in their range without any additional gas cost! This means everyone gets compounded more frequently and more cost-effectively than they would on other platforms. Plus, there's no need to charge high fees for compounding. This also means that the more people who use the protocol, the more efficient it becomes.