What is Single-Sided Liquidity Podcast

Understanding Single-Sided Liquidity on the Goblins Protocol

Single-sided liquidity allows you to provide liquidity to a pool using only one of the two tokens in the pair. This approach offers flexibility and can be particularly useful in certain market conditions. Here’s an in-depth look at how it works and some additional tips and considerations:

What is Single-Sided Liquidity?

  1. Definition:
    • Single Token Position: Single-sided liquidity is a liquidity position that holds only one of the two tokens in a pool.
    • Providing Liquidity: This allows you to provide liquidity using a single token from the pair, rather than needing both tokens.
  2. Current Liquidity Range:
    • Holding Both Tokens: The pool holds both tokens only within the current liquidity range, where all swaps are executed.

Supplying Single-Sided Liquidity on Goblins

  1. Choosing Your Range:
    • Range Selection: When supplying liquidity in Goblins, you can choose the price range for your position.
    • Outside Current Range: If you select a range that is outside the current market price range, you will only be able to supply one of the two tokens.

Practical Example

  1. Example Scenario:
    • Token Pair: You are providing liquidity for a BCH/USDT pool.
    • Current Price Range: If the current price of BCH is within $1,000 to $5,000 and you choose a range outside of this, say $5,500 to $6,000, you will only supply USDT if the current price is below your range or only BCH if the current price is above your range.

Additional Tips and Considerations

  1. Strategic Range Setting:
    • Market Analysis: Analyze market trends and volatility to select an optimal price range for your single-sided liquidity position.
    • Adjusting Ranges: Be prepared to adjust your range as market conditions change to maintain an effective liquidity position.
  2. Benefits of Single-Sided Liquidity:
    • Flexibility: Allows you to participate in liquidity provision without needing both tokens, which can be beneficial if you have a surplus of one token.
    • Reduced Risk: By holding only one token, you may reduce exposure to impermanent loss compared to holding both tokens in volatile markets.
  3. Potential Drawbacks:
    • Limited Fee Earnings: Your position may earn fewer fees if it remains outside the active trading range for an extended period.
    • Market Movements: Significant market movements may require frequent adjustments to keep your position within the optimal range.
  4. Monitoring and Adjustments:
    • Regular Checks: You should regularly monitor your liquidity positions and market prices to make necessary adjustments.
    • Use Analytics Tools: Utilize tools and platforms that provide insights and analytics on your liquidity positions to optimize performance.
  5. Security and Efficiency:
    • Secure Wallets: Ensure your wallet is secure and up-to-date to protect your single-sided liquidity positions.
    • Gas Fees: You should also be aware of gas fees when supplying and adjusting liquidity positions.

Conclusion

Single-sided liquidity on the Goblins Protocol offers a flexible approach to providing liquidity with only one of the two tokens in a pair. By understanding how to strategically set your price range and being prepared to monitor and adjust your positions, you can effectively manage and optimize your liquidity provision. Stay informed about market conditions, leverage available tools, and engage with the community to enhance your participation in the Goblins ecosystem.