Understanding Range Based Incentive campaigns
Range-Based Incentives enable campaign creators to direct liquidity rewards to specific price ranges within AMM pools, optimizing liquidity placement where it matters most.
Technical Overview
Key Components
Price Ranges (Tick Ranges):
- Liquidity is concentrated within discrete intervals (e.g., 0.99 – 1.005 for stablecoins).
- Defined using AMM-specific tick systems (e.g., Uniswap V3’s sqrtPrice ticks).
Liquidity Providers (LPs):
- Stake tokens in targeted ranges to earn rewards.
- Incentivized to optimize capital allocation (e.g., avoiding ranges with low trading activity).
Reward Allocation:
- Campaign creators distribute rewards proportionally to liquidity provision within specified ranges.
- Supports multiple reward tokens (e.g., protocol tokens, stablecoins).
Tech behind calculation
Each active position in the pool’s range is compared to the incentivized range and its weight (i.e. liquidity contribution) is scaled proportional to the intersecting range. There are 3 cases possible here:
The position is completely off range: Its weight is just nullified and the position’s owner is not given any reward for that position.
The position is completely in range: The position’s weight is taken as-is, depending on its liquidity density function (amount of tokens provided for the picked concentration level).
The position is partially in range: The width of the intersection between the position’s range and the incentivized range is calculated and compared to the width of the full incentivized range. The ratio of the 2 is used as a multiplier to scale down the overall weight of the position.
These are examples for both cases, assuming we have an incentivized range going from tick 0 to tick 10 for a pool:
- Assuming we have a position with weight 100 that goes from tick 100 to tick 110, that won’t be taken into consideration when giving out rewards.
- Assuming we have a position with weight 100 that goes from tick 1 to tick 5, that will be taken in consideration with weight 100 (i.e. in full) when giving out rewards.
- Assuming we have a position with weight 100 that goes from tick -10 to tick 10, we calculate the intersecting range’s width, which in this case is 10, and compare it to the full position range (20) to find out that we need to consider 50% of the position’s weight, so 50.
Campaign workflow
-
Define Ranges: Campaign creators specify target price ranges (e.g., 0.99 – 1.005 for stablecoin pools).
-
LPs Deposit Liquidity: LPs stake tokens in the defined ranges via AMM interfaces (e.g., Uniswap V3 positions).
-
Reward Distribution: Rewards are distributed based on LPs’ liquidity exposure within ranges. It can be claimed via Metrom’s dashboard.
Comparison with traditional incentives
| METRIC | TRADITIONAL INCENTIVES | RANGE BASED INCENTIVES |
|---|---|---|
| Liquidity Distribution | Uniform across all ranges | Concentrated in critical zones |
| Capital Efficiency | Low (wasted rewards) | High (reduced slippage) |
| User Experience | Suboptimal (high slippage) | Improved (tighter spreads) |
Core benefits
Directed Liquidity: Protocols can guide LPs on where their liquidity is most valuable, aligning with strategic objectives.
Increased Efficiency: Deep liquidity in targeted ranges reduces slippage and improves user satisfaction.
Effective: Protocols achieve greater liquidity for the same or even lower incentive spend, maximizing ROI.
Flexibility: Suitable for stable, and yield-bearing pools, Range-Based Incentives adapt to diverse use cases and goals.