Under the hood, how it works

Pancakeswap V3 is a fork from Uniswap V3 which uses NFT to represent a unique concentrated liquidity position. Hippo V3 vaults wraps the NFT position in an ERC20 compatible vault, enabling composability and greater ease of use for DeFI power users

To ensure low gas fees and highest possible yields in all market condition, the extensive calculation for price range estimations is handled off-chain by the range controller on dedicated high-performance servers. In addition to crypto specific factors, the range controller takes into account macroeconomics and important global economic event/announcement when determining the active liquidity price ranges.

The range control does not predict price direction but instead predicts volatility. During times of lower expected volatility the controller will tighten the active liquidity price range to generate maximum fees and during period of expected high volatility the controller will widen price range to prevent large Impermanent Loss (IL)

Each depositing user is minted an ERC20 token as a receipt and proof of share of the underlying NFT position. The NFT position is then staked in Pancakeswap Masterchef to earn $CAKE farming rewards.

Vaults are harvested at optimal frequencies, during harvest the $CAKE rewards and the LP fees generated by the liquidity pools are zapped and compounded back into the NFT position.