# Islands

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Introduction to Automated Liquidity Management (ALM)

Concentrated liquidity in Kodiak V3 pool offers significantly higher capital efficiency compared to traditional AMMs, but it comes with increased complexity in liquidity management. As liquidity providers need to actively manage their positions to maintain optimal ranges as prices move, Automated Liquidity Management (ALM) solutions become essential for efficient capital deployment.

#### What are Kodiak Islands?

Kodiak Islands are ERC20-wrapped Kodiak V3 positions that enable simplified liquidity provision through a fungible token interface. When users add liquidity to an Island, they receive Kodiak Island tokens representing their proportional ownership of the underlying Kodiak V3 position. These tokens can be freely transferred, traded, or redeemed for the underlying assets at any time.

Key benefits:

* Simplified liquidity provision through standard ERC20 interface
* Liquidity is rebalanced to stay "in range" and balanced around "fair price" (for managed Islands)
* Compatible with Berachain Proof-of-Liquidity, and eligible for BGT whitelisting
* Fungible ERC-20 representation of Concentrated Liquidity positions
* Automatic fee compounding
* Rebalance using liquidity through-out Berachain, not just what's in the pool

### Types of Kodiak Islands

* **Kodiak Islands** - Kodiak Islands are deployed and permissioned by Kodiak Protocol and rebalanced by permissioned parties (manager) authorized by the Kodiak Protocol.  Each Island has a strategy designed to keep the Island "in range" around "fair price" in order to be compatible with Proof-of-Liquidity.  For each island, the strategy involves determining the "fair price" (with an off-chain, external oracle), a range around that price (determined based on the volatility of the underlying pool), and a rebalancing frequency.  Kodiak Islands charge a manager fee of 10% of LP fees generated; these are used to fund and cover all gas fees, infrastructure, R\&D, and other operational costs of "running the Island."
* **Permissionless Islands** - Deployed by anyone, this enables anyone to create ERC-20 wrappers on a particular "fixed range" Kodiak V3 pool of their choice. For trust minimization, once the Island is deployed, the ranges cannot be adjusted. Permissionless Islands can be used to ERC-20 tokenize concentrated liquidity positions to assist with incentivization (Kodiak Farms or BGT), or to encourage pooled liquidity in a particular range. Permissionless Islands are also automatically whitelisted and discoverable in the Kodiak Frontend, along with analytics. Permissionless Islands charge a manager fee of 10% of LP fees generated, used to fund and cover all operational costs.


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