Preface

For education purpose. Not financial advice.

Why read this book

To Be Updated

This book describes liquidity provision (LP1) strategies for concentrated liquidity pools in all market conditions. You will learn

Concentrated liquidity designs can broadly be categorized into two types: continuous liquidity curves and discrete liquidity bins. Decentralized exchanges (DEXs) that employ liquidity curves are more common than those using bins. Prominent examples of the former include Uniswap (EVM chains), Raydium (Solana), Orca (Solana), Cetus (Sui), and Turbos (Sui). On the other hand, notable DEXs utilizing liquidity bins include Trader Joe (EVM chains), Maverick (EVM chains), and Meteora (Solana).

This book focuses on Uniswap v3 (Univ3) and Meteora DLMM pools. Univ3 pioneered the idea of concentrated liquidity and continues to dominate swap volume on EVM chains. It is battle-tested and has low smart contract risk. Meteora, inspired by Trader Joe v22, often generates higher yields in its DLMM pools than Raydium or Orca pools, thanks to its innovative dynamic fee feature. Additionally, Meteora has emerged as a popular token launchpad, allowing liquidity providers (LPs) to earn substantial fees during the early days of a token’s existence.

Structure of the book

Chapter 1. Quickstart
Chapter 2. Automated Market Maker (AMM)
Chapter 3. Deconstructing LP Returns
Chapter 4.
Chapter 5.
Chapter 6.
Chapter 7.
Chapter 8.
Chapter 9.
Chapter 10.
Chapter 11.

About the author

Coin Data School is a data scientist with background in math and statistics. He started building open source analytics and writing about DeFi in July 2022 after the collapse of Luna UST and Three Arrows.

  1. In this book, the term LP can mean Liquidity Provision, Liquidity Provider, or Liquidity Position—the context will make it clear which one is being referred to. It’s also used as a verb to mean providing liquidity to a pool. Sometimes, I will use the term LP position to make it clear that we are talking about a liquidity position (not a trading position, lending position, or any other kind).↩︎

  2. Between August 2023 and March 2024, I experimented with liquidity provision on Trader Joe v2 (TJv2) on Arbitrum but achieved worse results compared to Univ3. This was primarily because Univ3 consistently captured the majority of swap volume, while opening and closing positions on TJv2 incurred higher gas costs. Although gas has decreased since EIP-4844, I have not returned to TJv2.↩︎

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