A look at the breakdown of Lixir Vaults' liquidity positioning

Liquidity Position Structure

With the current strategy in place, each vault's liquidity position consists of two separate, uniform liquidity distributions: a 'base position' and a 'rebalancing position'.

The base position is determined by calculating the Geometric Weighted Average Price (GWAP) and taking a spread around it. The rebalancing position consists solely of the asset that the vault has in excess (since a concentrated liquidity position doesn't maintain 50-50 balance) and manifests as a range order touching the GWAP. This can be visualized by the example below. In this example, the GWAP = $3, the base position spread = $1 and the rebalancing position spread = 1/2 base position spread.


In order to compound the accrued LP fees that are collected separately in Uniswap V3 and make sure a proper LP range is maintained such that capital efficiency is optimized, a keeper is set in place and responsible for calling the rebalance function. Currently this happens every 6 hours, but in the near future the timing of rebalances will be dictated by a data-backed, algorithmic strategy.

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