Liquidity Pool Farming

The original design spreads liquidity across every possible price. It requires no management and earns fees on all volume, but capital is thinly deployed, so fee yield on the position is low and divergence loss is fully borne. Wesvel uses full-range pools mainly for long-tail pairs where active management is not justified by the size of the position.

Providers choose a price range and deploy all capital within it, earning a far larger share of fees while price stays inside the range and nothing when it leaves. This turns liquidity provision into an active strategy: ranges are set from realized volatility, monitored continuously and rebalanced when price approaches an edge. The rebalance itself crystallizes divergence loss (the provider sells the asset that has risen and buys the one that has fallen), so it is done on a rule rather than a reaction.

Protocols pay their own token to attract liquidity to a pool. The headline yield is often mostly emissions, denominated in an asset whose price the emission schedule itself pushes down. Wesvel accounts for emissions separately from fees, realizes reward tokens on a schedule rather than holding them, and models the position with emissions removed before deciding whether it stands on its own.

Pools that pair an asset with its staked or wrapped version, or two assets that move together, suffer far less divergence loss than volatile pairs, at the cost of lower fee volume. These form the core of the farming book. Volatile pairs are held in smaller size and only where the fee tier compensates for the expected divergence.

Liquidity providers are the counterparty to every arbitrage against their pool, including the ones that occur within a single block. Some newer designs return part of that value to providers or let pools set dynamic fees; where they exist, they are preferred. Entering and exiting a position is itself a trade against the pool and is routed through private relays where available.