# Core Protocol v2 & v3 DEX

## Infinite Liquidity Range (v2)

* The v2 DEX employs the constant product formula (x × y = k), which balances liquidity provision through automated protocols.
* Liquidity providers contribute two assets in equal value to establish balanced pools, ensuring fair and efficient trading conditions.
* Trades on v2 incur a 0.17% fee, which is distributed to LPs and automatically compounded into the position. This compounding mechanism enhances returns over time.
* LP positions are represented by PLP tokens, which can be sent, traded or used in yield farming protocols for additional opportunities.

<figure><img src="https://3320579344-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FSudl77uHmThWEOAanCUo%2Fuploads%2Fbk0gnmiq792QEAwRcSJE%2FINFINITE%20%26%20CONCENTRATED%20LP%201.1.png?alt=media&#x26;token=c6bf64b9-77dc-4bcf-9b6c-960127bd9499" alt=""><figcaption></figcaption></figure>

## Concentrated Liquidity (v3)

* The v3 DEX introduces concentrated liquidity, enabling LPs to allocate their capital to specific price ranges rather than the entire price curve. This increases capital efficiency and yields.
* The system supports multiple fee tiers (0.01%, 0.05%, 0.25%, 1%, and 2%), allowing LPs to tailor  strategies to their specific needs and expected returns. Generated fees can be claimed at any time.
* Single-asset contributions effectively act as limit orders that become active within the selected price ranges, offering sophisticated liquidity strategies and risk management.
* This model reduces slippage and provides higher APYs for LPs by optimizing capital efficiency.

<figure><img src="https://3320579344-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FSudl77uHmThWEOAanCUo%2Fuploads%2Fv0uRrNxzjfu7X1z8aEEJ%2FBob%20Alice%20example.png?alt=media&#x26;token=535b57ad-d214-4dc3-b4c5-540873f5a942" alt=""><figcaption></figcaption></figure>


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