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description: '>> next-gen liquidity management infrastructure'
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# Overview

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For liquidity providers, Uniswap V2 is a version of [Shannon's Demon](https://www.richmondquant.com/news/2021/9/21/shannons-demon-amp-how-portfolio-returns-can-be-created-out-of-thin-air) wherein the timestep between re-weights shrinks to 0. In other words, assets are shifted to maintain a 50%/50% inventory ratio at all times.

{% hint style="info" %}
**Example:** Assume the pool's holdings are initially balanced at 50%/50%. If the price of `token0` rises 25% while the price of `token1` is steady, it will become unbalanced: 56%/44%. To fix this, 10% of `token0` holdings must be traded for `token1`. To learn more, you can interact with [this math on Desmos](https://www.desmos.com/calculator/c0tlpgnjng).

_In practice, arbitragers rebalance Uniswap pools after much smaller price movements. In most cases, much less than 10% of holdings is necessary to facilitate the trade._
{% endhint %}

Uniswap V2 maintains this invariant by holding onto _all_ liquidity at all times. But as we saw in the example above, <mark style="background-color:green;">most of that liquidity is rarely touched</mark><mark style="color:green;">.</mark> Even after a massive 25% price spike, only 10% of `token1` holdings would need to be swapped for `token0` to get back to 50%/50%. This is what makes Uniswap V2 so capital inefficient.

Uniswap V3 allows you to keep all that rarely-used liquidity (the stuff that's far from the current trading range). But instead of _actually_ saving it, many people move it closer to the current trading range － levering up their positions. Unfortunately, if you're trying to maintain a balanced portfolio, this is dangerous because small price movements can cause large shifts in your inventory ratio. Worse yet, when a leveraged position is out of range, it's impossible to re-center it without locking in "impermanent" losses.

What if we stop using leverage and simply save the funds that Uniswap V3 frees up? What if we deploy them to other yield opportunities like [Compound](https://compound.finance), [Fuse](https://rari.capital), and [Yearn](https://yearn.finance)? This is what Aloe Blend does. More specifically, <mark style="background-color:green;">Blend combines the capital efficiency of Uniswap V3 with the passive liquidity style of Uniswap V2. It maintains a 50%/50% inventory ratio without sacrificing asset productivity.</mark>

At Aloe Labs, we believe Blend can and should be a [hyperstructure](https://jacob.energy/hyperstructures.html), so we built it to be 100% decentralized, permissionless, and autonomous from day one. Anyone can [deploy pools](overview/creating-a-pool) and silos, there are built-in incentives for bots to run `rebalance()`, and there are no fees, governance, or multisig. Blend runs entirely on-chain and requires no historical price data, so DeFi teams can integrate with it easily.

If you want to learn more, you're in the right place. Check out our pages on the [math behind Blend](mathematics) and [yield-earning silos](silos), or hop in our Discord to ask questions!
