What is a Tick when Providing Liquidity Podcast
Understanding Ticks and Basis Points in Goblins Liquidity Pools
Ticks and basis points (bps or “bips”) are essential units of measurement used in defining price ranges and percentage changes within liquidity pools. Here’s a detailed explanation with additional relevant information and considerations:
What are Ticks?
- Definition:
- Ticks: Units of measurement that define specific price ranges. A tick represents the smallest interval where liquidity can be placed in a pool.
- Basis Points (Bips): Basis points are used to show the percentage change in the price of a pool. A single tick and a single bip are interchangeable, both representing 0.01% or 0.0001 in decimal form.
- Spacing and Fee Tiers:
- Spacing: Each fee tier in a liquidity pool has its own tick spacing, which helps the pool keep track of liquidity.
- Fee Tiers: The fee tier percentage is a critical factor in determining the tick spacing and, subsequently, the pool fee value.
Calculating Pool Fee Value
- Pool Fee Value:
- Solidity Value: The pool fee value is the solidity value of the fee tier percentage.
- Decimal Conversion: The decimal value of a bip is 1/10,000th. To convert the fee tier percentage to the pool fee value, multiply the percentage by 10,000. For example, a 0.3% fee tier has a pool fee value of 3,000.
- Formula: You can also use the formula (1 / Pool fee value) to get the percentage.
| Tick-spacing | Multiplier | Fee Tier % | Multiplier | Pool Fee Value | Fee (bps) |
|---|---|---|---|---|---|
| 10 | 200* | 0.05 | *10000 | 500 | 5 |
| 60 | 200* | 0.3 | *10000 | 3000 | 30 |
| 200 | 200* | 1 | *10000 | 10000 | 100 |
Note: Solidity does not support percentages or decimals.
Tick Range and Pricing
- Range:
- Goblins Pools: Goblins pools have a tick range from a minimum of -887,272 to a maximum of 887,272.
- Divisibility: Ticks used for positions in upper and lower ranges must be evenly divisible by the spacing to ensure proper alignment and functionality.
- Price Conversion:
- Tick to Price: Ticks convert to a specific price within the liquidity pool. Each pool has two prices representing the value of token0 and token1, respectively.
Example and Practical Application
- Setting Price Ranges:
- Even Spacing: When setting a price range, ensure that your ticks are evenly spaced on both sides of the current price to achieve a roughly 50/50 liquidity split.
- Example: If the current price of an asset is $1,879, and you want a +/- 1% range, you would aim for ticks around $1,860 and $1,899. However, if exact ticks at these prices are not available due to spacing, your liquidity deposit may be skewed.
- Calculating and Using Ticks:
- Manual Calculation: Use the provided formulas to calculate and verify your pool fee value and corresponding ticks.
- Tools and Analytics: Utilize tools and analytics provided by Goblins or third-party platforms to help manage and optimize your liquidity positions.
Additional Tips and Considerations
- Market Monitoring:
- Price Movements: Regularly monitor the market prices of the tokens in your pool to adjust your positions as needed.
- Strategic Adjustments: Be prepared to adjust your tick ranges based on market conditions and trading volume to maintain an optimal liquidity position.
- Leveraging Community Insights:
- Community Engagement: Participate in community forums and groups to gain insights, share experiences, and receive support on managing liquidity positions effectively.
- Staying Informed: Keep up-to-date with any changes or updates to the Goblins Protocol that might impact spacing and fee calculations.
- Understanding Impermanent Loss:
- Risk Management: Be aware of the risks of impermanent loss and use spacing to manage and mitigate potential losses by setting appropriate price ranges.
Conclusion
Ticks and basis points are crucial for managing and optimizing liquidity positions in the Goblins Protocol. By understanding spacing, fee tiers, and how to calculate pool fee values, you can better manage your liquidity and ensure balanced, efficient positions. Regularly monitor market conditions, use available tools, and engage with the community to enhance your liquidity provision strategy.