Liquidity Shapes

What you’ll learn:

1. Introduction to Liquidity Shapes

• Spot

• Curve

• Bid-ask

1. How to earn fees using a Shape

2. The types of Shapes and Strategies

3. Your Risks

I. Introduction to Liquidity Shapes

This guide is tailored to help you get the most out of the Saros DLMM as deployed on Saros DLMM. At the core of this system is the concept of Liquidity Shapes—customizable strategies that allow you to decide how and where your capital is allocated across different price points. This flexibility empowers your funds to work smarter, enabling you to optimize returns based on your personal strategy and market expectations.

The secret behind Liquidity Shapes is the bin-based architecture. Unlike traditional AMMs, which spread your liquidity evenly, Saros DLMM lets you choose exactly where to place your funds by using "bins."

“What is a bin? A bin is a fixed-price segment in a Saros DLMM pool. Each bin corresponds to a specific price point. When you add liquidity to a bin, your funds are active only at that price level. Traders interact with your liquidity when the market trades within that bin's range—earning you fees in the process.”

By combining and customizing bins, you create a Liquidity Shape that matches your market outlook, risk tolerance, and strategy. There’s no “one-size-fits-all” approach—each shape has its own strengths depending on how and when it’s used.

Let’s explore the three core Liquidity Shapes:

1.1 Spot Shape

Structure:

Spot shape distributes liquidity uniformly across your selected price range. This means every price point within the range gets equal liquidity, offering a balanced, straightforward setup.

Ideal For:

• Stable or low-volatility tokens

• Traders who expect the price to hover near a specific level

• Quick, efficient trades at the market price

Why Use It:

It’s a reliable all-around option for maintaining consistent exposure across a range. Spot shape is simple yet effective, particularly when you want a passive strategy with even risk distribution.

1.2 Curve Shape

Structure:

Curve shape concentrates most of your liquidity around the central point of your range, gradually tapering off toward the edges. This forms a bell-curve-like distribution, maximizing capital efficiency near the expected price.

Ideal For:

• Pairs with low to moderate volatility

• Long-term liquidity providers

• Sideways or range-bound markets

Why Use It:

Perfect for passive LPs looking to stay in-range longer while optimizing returns. Curve shape offers a smart balance between exposure and efficiency, reducing the need for frequent repositioning.

1.3 Bid-Ask Shape

Structure:

The Bid-Ask shape places liquidity at both ends of your selected range, leaving the middle relatively empty. It resembles an inverted curve or order book, focusing on price extremes.

Ideal For:

• Volatile or swing-trading environments

• Stable or pegged pairs with sudden deviations

• Traders aiming to buy low and sell high over time

Why Use It:

This setup is tactical and reactive. By concentrating liquidity on the outer edges, it’s well-suited for earning fees during volatility or for gradually accumulating/distributing positions during swings.

II. How to Earn Fees

As an LP, you earn trading fees when users swap tokens in the bins where your liquidity is active. The more trading activity in your bins, the more fees you collect. Here’s how to get the most from your liquidity:

• Stay in Active Bins: You only earn fees when trades occur in the bins you’ve chosen. Position your liquidity where trading volume is highest.

• Adjust with the Market: Markets shift—so should your strategy. Monitor your shapes and move them as needed to stay relevant.

• Match Shape to Conditions:

  • Spot Shape for stable prices

  • Curve Shape for sideways or range-bound markets

  • Bid-Ask Shape for high-volatility situations

With Liquidity Shapes, you control where your funds are used—so you can focus your capital where it works hardest.

III. The Types of Shapes and Strategies

Whether you’re just starting out or looking to fine-tune advanced strategies, Saros DLMM supports a wide range of liquidity deployments. Here's a breakdown:

Basic Strategies

Designed for ease-of-use, these are ideal for users who are new to Saros DLMM or concentrated liquidity:

• Passive Curve: A smooth distribution across a price range. Easy to set, low maintenance.

• Tight Spot: Narrow deployment around a stable price. Great for active monitoring.

• Entry/Exit Spot: Use a narrow shape to gradually buy or sell into a token.

Advanced Strategies

For more experienced users looking to customize deeply and control risk/reward:

• Split Shapes: Combine bid-side and ask-side liquidity to profit from price swings.

• Staggered Curves: Layered deployments for covering breakout zones.

• Automated Rebalancing: Use bots or external tools to adjust shapes in real time based on volatility or indicators.

Single-Sided Strategies

Target just one side of the market:

• Buy-side Liquidity: Accumulate a token when price dips.

• Sell-side Liquidity: Exit your position as the price increases.

These are highly effective for efficient entries and exits—especially when paired with the right shape.

IV. Understanding the Risks

Participating in liquidity provision—regardless of strategy—comes with inherent risks. These include, but are not limited to:

• Impermanent Loss (IL) when asset prices diverge

• Smart contract vulnerabilities

• Systemic or platform-related failures

• Market volatility and liquidity crunches

• Regulatory shifts

• Human or operational errors

There are no guarantees in DeFi, and you should only provide liquidity with capital you can afford to lose. If you're unsure, always seek advice from a qualified financial professional.