🤝Automated Market Maker

Hercules offers two native Automated Market Makers (AMMs). These products handle users' swaps and liquidity pools.

Below is a quick description of how V2 and V3 AMMs operate:

Hercules DEX V2 pools can be thought of like traditional liquidity pools in crypto. Two assets pooled together that have a roughly equal distribution in value. The pools have use, but are easily unbalanced by large trades creating increased slippage for users. While still an important feature to support, there are better options available, especially for more stable assets whose value is determined by a large consensus of sources (think USDC or ETH)

V3 Pools offer a liquidity solution, allowing users to concentrate their positions within set ranges, leading to increased liquidity within the bounds of those set ranges. A simple rule of thumb to consider, the tighter the range, the higher the yield a user can earn. However, there is also an increased exposure to impermanent loss. Periodically, users may need to adjust ranges to continue capturing yield optimally. These ranges can either be set manually, or can be managed by a liquidity manager incorporated by Hercules Dex. It’s worth noting that in order for users to participate in nitro pools, they must select a service to manage their ranges for them.