> For the complete documentation index, see [llms.txt](https://tapp-exchange.gitbook.io/tapp-exchange/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://tapp-exchange.gitbook.io/tapp-exchange/user-guides/earn/liquidity-pools/pools-types.md).

# Pools Types

## Pool Structure in an AMM Pool:

* **One Pool = One Contract:** Each trading pair (like ETH/USDC) has its own smart contract
* **Uniform Liquidity Distribution:** Your deposited tokens spread across ALL possible prices (0 to ∞)
* **Simple Pool Mechanics:** Uses X × Y = K formula (constant product)
* **Equal Value Deposits:** Must deposit equal dollar amounts of both tokens

## How AMM Pool Work:

* **Global Pool:** All liquidity providers share one big pool per trading pair
* **Automatic Rebalancing:** As trades happen, your token ratio changes automatically
* **Fee Distribution:** 0.3% trading fee shared proportionally among all LPs
* **Set and Forget:** Once deposited, liquidity works across all price ranges

## Strengths:

* ✅ Simple to understand and use
* ✅ Always active (never goes "out of range")
* ✅ Predictable behavior
* ✅ Low maintenance

## Weaknesses:

* ❌ Capital inefficient (most liquidity unused)
* ❌ Lower fee earnings potential
* ❌ High gas costs for complex operations
* ❌ No customization options

**Best For:** Beginners, passive investors, unpredictable markets

## CLMM: The Efficiency Upgrade

**Revolutionary Pool Structure:**

* **Same Pool, Multiple Positions:** Each pool can contain many individual liquidity positions
* **Concentrated Liquidity:** Each position covers only a specific price range you choose
* **Tick-Based System:** Price ranges defined by discrete "ticks" (0.01% increments)
* **Individual LP Strategies:** Each LP can have completely different approaches in the same pool

**How CLMM Pools Work:**

* **Custom Price Ranges:** Choose upper and lower price boundaries for your liquidity
* **Active vs Inactive:** Your position only earns fees when price is within your range
* **Multiple Positions:** You can create several positions in the same pool with different ranges
* **Fee Tiers:** Multiple fee levels (0.05%, 0.3%, 1.0%) with different tick spacing

**Position Examples in ETH/USDC Pool:**

* **Conservative LP:** $1,500 - $3,000 range (wide, stays active longer)
* **Aggressive LP:** $1,950 - $2,050 range (narrow, higher returns when active)
* **Multi-Position LP:** Several overlapping ranges for diversification

**Strengths:**

* ✅ **Massive capital efficiency gains** - up to 4,000x for stablecoin pairs
* ✅ **Higher fee earnings potential** when positions remain active
* ✅ **Strategic control** over exactly where liquidity is deployed
* ✅ **Flexible fee structures** with multiple tiers (0.05%, 0.3%, 1.0%)
* ✅ **Reduced impermanent loss** for well-positioned ranges
* ✅ **Professional-grade tools** for sophisticated liquidity strategies

**Weaknesses:**

* ❌ **High complexity** requiring careful price range selection
* ❌ **Active management burden** to maintain optimal efficiency
* ❌ **Amplified impermanent loss** when using narrow ranges
* ❌ **Higher gas costs** for frequent position adjustments
* ❌ **Inactive periods** when price moves outside chosen ranges
* ❌ **Learning curve** steep for newcomers to DeFi

**Best For:** Sophisticated LPs, stablecoin pairs, active traders

## Stable Swap: Purpose-Built for Stable Assets

StableSwap pools are **specialized for assets with tightly correlated prices**, such as stablecoins or liquid staking derivatives. By concentrating liquidity around the peg, they achieve **extremely low slippage** and **minimal impermanent loss**, making them a go-to for stable asset swaps.

* **Single Pool per Pair:** All LPs share the same reserves
* **Custom Pricing Curve** optimized for stable assets (Curve-inspired formula)
* **Amplification Factor (A)** increases liquidity depth near the peg
* **Low Fee Tiers** (commonly 0.01%–0.05%) due to lower volatility

**How It Works**

Uses a **modified constant product formula** that flattens the curve around the peg **Amplification Factor** simulates deeper liquidity, reducing slippage on large trades Ideal for **1:1 swaps** between assets that maintain close price parity Trades rebalance the pool while keeping price stability

**Strengths**

* ✅ **High capital efficiency** for stable pairs
* ✅ **Low slippage** on large trades
* ✅ **Minimal impermanent loss** due to correlated assets
* ✅ **Passive LPing** — no need for active price adjustments
* ✅ **Optimized amplification presets** for different asset types

**Weaknesses**

* ❌ **Ineffective for volatile assets**
* ❌ **No custom price range control** like CLMM
* ❌ **Fee potential lower** than high-volume CLMM strategies
* ❌ **Requires correct amplification factor** to perform optimally