Is Your Crypto Lazy? How KoalaSwap Puts Your Capital to Work

Trends

Dec 01,2025

By Joshua

Overview: A Smarter Way to Swap

The Old Problem

If you’ve used an older decentralized exchange (DEX), you might have noticed something inefficient about them. Liquidity—the pools of tokens that make trading possible—was spread thin, like a tiny bit of butter over a huge piece of toast. It was distributed across every possible price, from zero to infinity. This meant that for most assets, especially stablecoins that trade in a tight range, the vast majority of the capital sat idle, completely unused. This resulted in inefficiency for both traders, who faced higher price impact, and liquidity providers, who earned less from their assets.

KoalaSwap’s Solution

KoalaSwap introduces a powerful solution to this problem: concentrated liquidity. In simple terms, this feature lets you choose exactly where your money works. Instead of spreading your capital across an infinite price range, you can concentrate it in the busiest trading zones. By focusing your liquidity where the action is, your capital becomes far more effective at facilitating trades and earning fees.

Built for Everyone

KoalaSwap is a “permissionless” protocol built on the Unit Zero blockchain. For a new user, this means that anyone, anywhere can use it without asking for permission. Whether you want to swap tokens or provide liquidity, the system is entirely open for public use. This stands in stark contrast to traditional financial services, which often restrict access based on geography, wealth, or status.

Why It’s Different

KoalaSwap represents a next-generation Automated Market Maker (AMM). Unlike traditional exchanges that rely on order books (lists of buy and sell orders), AMMs use liquidity pools to determine prices. KoalaSwap improves on older AMM models by making them vastly more efficient. This innovative design directly leads to better prices and lower price impact for traders, while creating the potential for significantly higher fee earnings for liquidity providers. This unique pool-based model also unlocks novel trading strategies, like earning fees on limit-style orders, which is impossible on traditional exchanges.

Innovations and Expansion: The Engine Behind KoalaSwap

The Magic of Concentrated Liquidity

To understand the power of concentrated liquidity, consider a stablecoin pair that almost always trades around a 1:1 ratio. In older systems, only about 0.50% of the funds in a pool would be active in the most common trading range of

0.99-

1.01. The other 99.5% was effectively wasted. KoalaSwap changes the game by letting you put 100% of your funds within that precise

0.99-

1.01 range, or any other range you choose. This focus creates exceptionally deep liquidity right where it’s needed most.

Understanding Active Liquidity

What happens if the market price moves outside the range you’ve set? At that point, your liquidity becomes “inactive” and stops earning fees. Your position will convert entirely to one of the two assets in the pair. This happens because as traders swap one asset for the other, your position is gradually depleted of the asset being sold until it consists entirely of the asset being bought. Once the price moves back into your chosen range, your liquidity reactivates automatically, and you start earning fees again. This dynamic highlights the need for active management to ensure your capital keeps working for you.

How It Works: Ticks and Ranges

The system achieves this precision using “ticks.” You can think of ticks as tiny, discrete price steps on a ladder. When providing liquidity, you select an upper and a lower tick to define your specific trading range. This gives you exact control over where your funds are deployed. Crucially, the spacing between these ticks depends on the pool’s fee level: lower fees allow for tighter, more precise ticks, while higher fees require wider spacing.

Finding the Right Fee

KoalaSwap offers pools with three different fee tiers that are directly connected to asset volatility and tick precision: 0.05%, 0.3%, and 1%. This interconnected system allows providers to match their risk with an appropriate reward:

• 0.05%: Best for low-volatility pairs like stablecoins. The risk is minimal, so fees are low. This tier allows for the tightest tick spacing, enabling extreme capital efficiency for assets that trade in a narrow band.

• 0.3%: A standard tier suitable for many common, less correlated token pairs like ETH/USDT.

• 1%: Designed for more volatile or exotic assets. The higher fee compensates liquidity providers for taking on greater risk. This tier has wider tick spacing, which is more appropriate for assets whose prices can swing dramatically.

It’s important to note that fees are not automatically reinvested. Liquidity providers must manually claim their accumulated earnings from their positions.

Ecosystem and Utility: What You Can Do on KoalaSwap

Swapping Tokens with Confidence

At its core, KoalaSwap allows anyone to swap ERC-20 tokens in a simple, permissionless way. A key factor in getting a good price is “price impact,” which is the effect your trade has on the token’s price in the pool. Thanks to concentrated liquidity, this impact is often lower on KoalaSwap because there is more capital available at the current market price.

Staying Safe from Price Swings

“Slippage” occurs when the price of an asset changes between the moment you submit a swap and when it’s confirmed on the blockchain. KoalaSwap protects you with a “slippage tolerance” setting. If the price moves against you by more than your set percentage, the transaction will automatically be canceled, protecting you from an unexpectedly bad trade.

A New Trick: Range Orders

Range Orders are a powerful feature unique to KoalaSwap’s model. They allow you to set up trades that function like “limit orders” on traditional exchanges. This means you can place an order to buy or sell an asset once it reaches a specific price, and then withdraw your funds after the trade executes.

How to Use a Range Order

Imagine you want to set a “take-profit” order to sell ETH when its price rises. If ETH is currently trading at 1,500 USDT, you could provide your ETH as single-asset liquidity in a very narrow range just above the current price—for example, between 1,599 and 1,601 USDT. As the market price moves up and into your range, your ETH is automatically and gradually sold for USDT.

The Benefits and Catches

The biggest benefit of a Range Order is that unlike a traditional limit order, which may cost a fee, on KoalaSwap you actually earn trading fees while your order is being filled. These fees are paid out in both assets of the trading pair, even if you only provided one to start. However, there’s a catch: if the price enters your range but then reverses before your order is completely filled, you might be left with a partial trade. You must monitor your position to withdraw your assets once the order has executed to your satisfaction.

Important Token Considerations

KoalaSwap’s design means it doesn’t work perfectly with every type of token. Specifically:

• Fee-on-transfer tokens are not supported.

• Rebasing tokens can be used, but providing liquidity for them is highly discouraged, as it can lead to unrecoverable losses for providers during a negative rebase.

Bottom Line: The KoalaSwap Advantage

Capital Efficiency is Key

KoalaSwap’s main advantage can be summarized in one sentence: It lets your capital work smarter, not harder. This extreme capital efficiency is the core reason it can offer deeper liquidity, better prices for traders, and the potential for higher fees for providers compared to older models.

A More Hands-On Approach

While powerful, KoalaSwap is best suited for providers who are willing to be more active. To maximize earnings, you must monitor your positions to ensure they remain in-range where they can collect fees. This hands-on approach gives you more control but also requires more attention.

A Balanced Final Assessment

The KoalaSwap protocol is an innovative leap forward for decentralized exchanges. Features like concentrated liquidity and range orders give users unprecedented control and efficiency. At the same time, users should be aware of its unchangeable, “immutable” nature and the need to manually claim fees. By understanding both its strengths and its required trade-offs, you can decide if this powerful tool is the right fit for your crypto strategy.

Project website