> For the complete documentation index, see [llms.txt](https://brownfi.gitbook.io/brownfi-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://brownfi.gitbook.io/brownfi-docs/overview/problems-with-traditional-amms.md).

# Problems with Traditional AMMs

Liquidity providers in traditional AMMs face several well-documented challenges:

* Low capital efficiency (CPMM): In a CPMM like Uniswap V2, liquidity is spread uniformly across all prices from zero to infinity. Only a tiny fraction of reserves is active at the current market price at any given moment. To offer competitive pricing for a $10,000 trade, a CPMM pool may need $10M or more in TVL — the vast majority sitting idle and earning nothing.
* Active management burden (CLMM): Uniswap V3 tackled capital efficiency by letting LPs concentrate liquidity within chosen price ranges. But this introduced a new problem: LPs must now actively monitor and rebalance their positions as prices move. An out-of-range position earns zero fees while still holding an imbalanced portfolio, suffering losses with no revenue to compensate. What was once a passive deposit has become an active portfolio management task.
* Loss-Versus-Rebalancing (LVR): In any pool-based AMM, the pool has no knowledge of the global market price. When prices move, arbitrageurs exploit the lag before the pool can react, extracting value directly from LP reserves. This structural, unavoidable cost is known as LVR, and it applies to both CPMM and CLMM. Because BrownFi prices every swap from a live oracle, the pool always trades at or near the global market price, eliminating this source of loss entirely.
* Fixed Fees: AMMs that charge the same fee regardless of market volatility cannot protect LPs when conditions become turbulent.
* Non-fungible LP positions (CLMM): Because each Uniswap V3 position has a unique price range, LP tokens are non-fungible (NFTs). This makes them harder to compose with other DeFi protocols, limits their use as collateral, and reduces liquidity on secondary markets — a significant usability drawback for everyday LPs.

BrownFi V3 is designed to address all five of these problems through its oracle-first pricing model, fungible LP tokens, and concentration mechanics that require zero active management from LPs, but from professional market makers.

At launch, all pools are monitored and tuned by the BrownFi team. Over time, other professional Market Makers will be invited to manage pools themselves, with BrownFi offering market making as a service, so that everyday LPs simply deposit and earn, while experts handle the strategy.

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