# Liquidity Pools
The core functionality of liquidity pools is to allow users to exchange tokens securely, with low fees and minimal slippage.
**Slippage** refers to the difference between the current market price of a token and the price at which the exchange/swap is executed. This difference could result in receiving a smaller amount (due to a higher price paid) or a larger amount (due to a lower price paid) of the desired tokens than expected.
To provide access to the best rates on the market, a distinction is made between two primary token types:
* **Correlated tokens**, such as stablecoins ($USDC, $DAI, etc.)
* **Uncorrelated tokens**, such as $BLACK and $BTC
The protocol's router evaluates both pool types to determine the most efficient price quote and trade execution route.
The greater the liquidity of a given pool (higher value locked), the lower the slippage.
### **Variable AMM (vAMM) Pools**
The vAMM pools are designed for trading pairs of volatile, uncorrelated assets, e.g. USDC/BTC.b. The following constant product formula is applied to determine the price which allows the pool to accommodate wide price swings but with higher slippage for large trades.:
*x × y ≥ k*
Standard trading fees are higher to compensate for increased volatility and risk.
### **Stable AMM (sAMM) Pools**
Stable pools are designed for efficient trading of correlated assets with minimal price volatility relative to eachother, e.g. USDt/USDC. The pricing formula for these pools allows for low slippage even with large trading volumes. These Stable pools use the following price determination formula:
*x³y + y³x ≥ k*
### **Concentrated Pools**
Concentrated Pools enable Liquidity Providers (LPs) to define custom price ranges for their positions, offering precise control over capital deployment and strategy.
**Price Range Selection:**\
LPs can choose the specific price range in which their liquidity will be active. This means they only provide liquidity for trades that occur within their selected range, making their capital work more efficiently.\
Each liquidity position is unique, allowing LPs to set different strategies for the same trading pair. For example, one position might cover a wide price range, while another covers a narrow range.
**Higher Capital Efficiency:**\
By focusing liquidity around the current market price, LPs can earn more fees with less capital compared to traditional AMMs, where liquidity is spread thinly across all possible prices
**Benefits:**
* Increased fee earnings due to higher capital efficiency.
* Customizable risk and reward strategies by selecting different price ranges and fee tiers
**Risks:**
* Impermanent loss can be magnified if the price moves sharply outside the chosen range.
* Requires more active management compared to traditional AMMs
These pools are designed for market makers—whether individuals or institutions—who want to build on top of BLACKHOLE.
**Calculating APRs**
The APR is calculated using the total staked liquidity.
#### **Automated Liquidity**
Our concentrated liquidity pools integrate seamlessly with leading Automated Liquidity Managers (ALMs) to simplify position management. These ALMs automatically adjust position ranges to maintain optimal coverage, maximize emissions, and reduce impermanent loss risk, enabling passive, hands-off yield generation.
Native ALM Integrations:
* [Gamma](https://app.gamma.xyz/vaults/blackhole/avalanche)
* [Steer Finance](https://app.steer.finance/)
### Zap
Liquidity Providers are able to enter any pool with any token. This process is completed in a single transaction, which includes swapping the required amounts into the assets (managing the correct ratios and price ranges) and providing the liquidity.
The "Provisioning steps" section on the right-hand side provides details on the swap amounts and the resulting price impact. Be aware that tokens with low liquidity may experience a significant price impact; therefore, it is crucial to assess this risk before making any decisions.
\
Zap functionality will support both basic and concentrated liquidity pools.
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