DLMM
Strategies & Use Cases
Learn how to build optimal liquidity shapes with DLMM by allocating tokens at different price points to match your LP goals and market conditions.
Overview
Through allocating different amounts of tokens at diverse price points, we are able to build a desired liquidity shape (volatility strategy) with the DLMM that best fits our LP goals.Choose Your Strategy
Select the volatility strategy that aligns with your market outlook and risk
tolerance.
Primary Liquidity Shapes
Spot
Provides a uniform distribution of liquidity that is flexible and suitable for any type of market and conditions. It is the most straightforward volatility strategy to deploy for new LPs who want to rebalance their position less frequently. This is similar to setting a CLMM price range.Curve
Ideal for a concentrated approach that aims to maximize capital efficiency by allocating capital mostly in the middle of your price range. This is great for stables or pairs where the price does not change very often.Bid-Ask
Bid-Ask is an inverse Curve distribution, where most of your capital is allocated towards both ends of the range. This strategy can be used to capture bigger volatility swings away from the current price. Bid-Ask is more complex than Spot and may require more frequent rebalancing to be effective, but has a high potential for fee capture during situations where prices fluctuate wildly around the current price. Bid-Ask can also be deployed single-sided for a DCA in or out strategy.Strategy Comparison
| Strategy | Advantages | Disadvantages | Considerations |
|---|---|---|---|
| Curve | Capital-efficient deployment Ideal for calm markets | Increased risk of impermanent loss | Needs consistent rebalancing based on current price |
| Bid-Ask | Captures market volatility Great for DCA in/out of positions | Riskier than other positions | Requires rebalancing to remain efficient |
| Spot-Concentrated | Ideal for stablecoin pairs Maximizes asset efficiency | Highest risk of IL when price leaves bin range | If used for volatile pairs, monitor closely due to high IL risk |
| Spot-Spread | Very capital-efficient Stays in range for small intra-day volatility | High risk of impermanent loss | Daily monitoring recommended |
| Spot-Wide | Lower IL risk Suited for less active LPs | Reduced capital efficiency | Better than x*y=k in general, but less efficient than concentrated strategies |
Advanced Strategies
For experienced liquidity providers looking to implement sophisticated market-making approaches:- Ranged Limit Orders - Execute trades within specific price ranges
- DCA while earning - Dollar-cost average while collecting fees
- Sell/Buy Walls - Create significant liquidity barriers at key price levels
- Gradual Ladder Orders - Systematically scale in/out of positions
- De-peg Bets - Profit from temporary price dislocations
Advanced strategies require active management and deep understanding of
market dynamics.
Understanding Bin Steps
What is Bin Step?
Each bin represents a single price point, and the difference between 2 consecutive bins is the bin step. Bin steps are calculated based on the basis points set by the pool creator. Bin step is similar to tick size and a higher size means a larger jump from one price to the next.Example: APT/USDT Bin Steps
If the current price for APT/USDT is $4 per APT and the bin step is 25 basis points (0.25%), then the consecutive bins would be:- Bin 1: $4.00
- Bin 2: 4.00×1.0025=4.05
- Bin 3: 4.05×1.0025=4.10
- And so on…
Bin Step Trade-offs
Smaller Bin Step
- Pros: Allows you to capture more volume
- Cons: Your max price range per position is smaller
- Best for: Stable pairs
Larger Bin Step
- Pros: Allows you to set a wider price range per position
- Cons: Less volume capture
- Best for: Volatile pairs - helps reduce errors from excessive bin switching
Note: Maximum number of bins per position is 69.
Bin Step and Base Fees
How is Bin Step Related to Base Fee?
Base Fee is the minimum fee charged per swap.Key Relationships:
- Lower fee attracts more volume, higher fee earns more per swap
- Larger bin step often correlates with higher base fee
- A lower base fee than competitors may increase flexibility for applying dynamic fees to optimize performance given market volatility
Strategic fee positioning can provide competitive advantages in attracting
volume while maintaining profitability through dynamic fee adjustments.