Liquidity Provision

Providing liquidity in a Magma Finance CLMM pool allows for a highly customized and potentially more profitable experience compared to traditional AMMs. Here’s a step-by-step guide to get you started.

Set Your Price Range

This is the most critical step in providing liquidity to a CLMM. You need to define the price range (minimum and maximum price) in which you want your liquidity to be active.

• Narrow Range: A narrower price range leads to higher capital efficiency and potentially higher fee earnings. However, it also increases the risk of the market price moving outside your range, at which point your liquidity becomes inactive and you stop earning fees.

• Wider Range: A wider price range is a more passive strategy, similar to traditional AMMs. It requires more capital for the same level of fee generation but is less likely to become inactive.

Consider the volatility of the assets in the pool when choosing your range. For stable pairs, a narrow range is often optimal. For more volatile assets, a wider range may be more appropriate.

Deposit Your Assets

Once you've set your price range, the interface will show you the required ratio of the two assets you need to deposit. This ratio depends on where the current market price is in relation to your chosen range.

• If the current price is within your range, you will need to deposit both assets.

• If the current price is below your range, you will only need to deposit the quote asset.

• If the current price is above your range, you will only need to deposit the base asset.

Confirm and Mint Your Position NFT

After you've specified the deposit amounts, you can confirm the transaction. Your liquidity position will be minted as an NFT, which will appear in your wallet. This NFT is your claim to the liquidity you've provided and the fees it generates. You can manage your position (add or remove liquidity, or claim fees) through the Magma Finance interface by selecting this NFT.