Overview
KyberSwap Elastic (Polygon) launched around 2022 as a concentrated liquidity AMM designed to improve capital efficiency. It allows liquidity providers to set custom ranges like Uniswap V3 while auto-compounding earnings with a reinvestment curve. The design aimed to cut slippage and maximize returns where trading is most active.
What it brought
KyberSwap Elastic’s innovation gave LPs control over where to deploy liquidity and introduced multiple fee tiers. Auto-compounding meant providers didn’t need to manually harvest rewards, adding passive efficiency to active strategies.
Activity & volume
The protocol supports between 4 and 65 coins with up to 65 trading pairs, depending on pool snapshots. Daily volume hovers in the low thousands of dollars, making liquidity thin. Spot markets only support swaps—no margin or leverage.
Fees & tiers
Liquidity providers can choose between several fee tiers: from as low as 0.008% for stable pools to 1% for riskier, volatile pairs. This structure lets LPs balance their risk/reward profile.
Security incident
In November 2023, KyberSwap Elastic was exploited via a tick-math vulnerability. Attackers drained over $56M from liquidity providers before the protocol was paused. Recovery grants were introduced, but the exploit damaged user trust and highlighted fragility in its engineering.
Strengths
- Concentrated liquidity improves capital efficiency.
- Auto-compounding rewards streamline yield farming.
- Tiered fees provide LPs with control over returns.
- Modern AMM architecture inspired by Uniswap V3.
Weaknesses
- Low trading volume and thin liquidity.
- Complex mechanisms deter casual users.
- High-profile exploit in 2023 harmed credibility.
- Limited selection of coins and pools.
Snapshot table
| Feature | Strengths | Rough Spots |
|---|---|---|
| Liquidity Mechanics | Concentrated positions, auto-compounding yields | Harder to grasp than simple LP models |
| Fees | Multiple fee tiers for custom strategies | High tiers steep for smaller LPs |
| Volume & Coverage | Runs on Polygon with flexible pools | Low daily volume, limited assets |
| Security | Advanced AMM features | Exploit showed critical weaknesses |
| Architecture | Backed by Kyber team (Loi Luu, Victor Tran) | Engineering complexity increases risk |
Final take
KyberSwap Elastic on Polygon was ambitious DeFi design: concentrated liquidity, auto-compounding, tiered fees. But the $56M exploit underscored the risks of experimental math in AMMs. For advanced LPs, it still offers innovative tools. For mainstream users, its thin activity and security baggage make it a cautious pick.