Add Liquidity Overview

What is Adding Liquidity?

In DLMM, adding liquidity means:

• Depositing token pairs into specific price bins

• Receiving a position NFT that tracks your share

• Earning fees from trades that occur in your bins

• Managing liquidity across discrete price levels

Core Concepts

Position NFTs

Your liquidity is represented by a Position NFT that:

• Tracks your share across multiple bins

• Accumulates trading fees

• Can be transferred or sold

• Allows partial withdrawals

Bins and Price Ranges

• Each bin represents a specific price level

• You choose which bins to add liquidity to

• Only the "active bin" facilitates trades

• Price moves by jumping between bins

Distribution Strategies

How you spread liquidity across bins:

• SPOT: Uniform distribution

• CURVE: Concentrated around current price

• BID-ASK: Weighted away from center

• CUSTOM: Manual bin selection

The Workflow

1. Choose Your Pair

const pair = await sdk.Pair.getPair(pairAddress);
const currentPrice = calculatePrice(pair.parameters.active_id);

2. Select Distribution Strategy

Decide how to allocate liquidity:

• Tight range for higher fee capture

• Wide range for consistent coverage

• Strategic placement for limit orders

3. Calculate Token Amounts

DLMM requires specific ratios per bin:

• Bins below active: 100% token Y

• Active bin: Mixed ratio

• Bins above active: 100% token X

4. Execute Transaction

Two options available:

• Create new position + add liquidity

• Add to existing position

Key Considerations

Capital Efficiency

• Narrower range = higher fee share

• Wider range = more consistent fees

• Active bin earns most fees

Impermanent Loss

• Occurs when price moves from entry

• Wider ranges reduce IL risk

• Consider correlation of assets

Rebalancing Needs

• Narrow ranges need more management

• Wide ranges are more passive

• Monitor active bin position

Best Practices

• Start Small: Test with small amounts first

• Monitor Performance: Track which bins earn most fees

• Consider Volatility: Adjust range based on pair behavior

• Plan Exit: Know your withdrawal strategy

Common Patterns

Passive Income Strategy

• Use SPOT distribution

• Wide range (50-100 bins)

• Minimal management needed

Active Trading Strategy

• Use CURVE distribution

• Tight range (10-20 bins)

• Rebalance frequently

Limit Order Strategy

• Use CUSTOM distribution

• Single bin placement

• Acts like a limit order

Next Steps

Ready to add liquidity? Choose your approach:

1. Quick Start: Add to New Position - One transaction setup

2. Existing Position: Add to Existing Position - Increase current liquidity

3. Learn Distributions: Explore SPOT, CURVE, or BID-ASK

Related Topics

• Calculate Token Amounts - Required tokens per bin

• Position Management - Managing positions

• Fee Structure - How fees accumulate