🟣Auto-Rebalance

With A51 Carbon, rebalancing happens autonomously on-chain. Rebalance works in conjunction with Market Modes.

A51 Carbon offers two types of rebalancing namely:

1. Active: Active rebalancing adjusts your liquidity position within the TWAP by actively adjusting the distribution of tokens in your liquidity pool. It ensures your position is always active to keep earning fees and yields from trading volume. This can lead to excessive liquidity shifting and rebalancing, especially in narrow ranges leading to high divergence (impermanent) loss. Liquidity is always active and earning fees.

2. Trailing (coming soon): Trailing rebalancing works by trailing the liquidity with TWAP before executing the rebalance. It does so to wait for the current price to come back in range. This can reduce excessive liquidity shifting and rebalancing leading to less divergence (impermanent) loss. Liquidity is less active and earns less fees.

Liquidity providers can further customize how rebalance happens:

TWAP deviation: Provides rebalancing cushion in price swings.

1. Min deviation: Set the lower threshold of TWAP deviation.

2. Max deviation: Set the upper threshold of TWAP deviation.