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💧 Liquidity Provision Strategies

Providing liquidity in DeFi isn/t just a "set and forget" game - unless you want it to be. The right strategy depends on how active you want to be, your risk tolerance, and which chain or protocol you're using.

On Solana, low fees make it easy to adjust frequently. On Ethereum, high gas costs reward more passive, long-range strategies.

In this guide, we/ll break down both approaches and help you find your fit.

🛌 Passive Liquidity Provision​

Passive LPing is a great way to earn yield over time without constant rebalancing. It works especially well on Ethereum, where gas fees make frequent repositioning expensive.

✅ Pros:​

  • Minimal time commitment
  • Low maintenance
  • Great for long-term exposure

📈 Example Strategy:​

  • Protocol: Uniswap V3 (Ethereum Mainnet)
  • Pair: ETH/USDC
  • Range: Wide - e.g., $2,000 to $3,000
  • Approach: Set the range, deposit, and let it run for weeks/months

🤔 When to Use:​

  • You have strong conviction in ETH over the long term
  • You want to earn fees while avoiding gas fees from rebalancing
  • You're okay with some impermanent loss in exchange for passive income

⚙️ Active Liquidity Provision​

Solana shines for active LPing - its low fees let you rebalance often, tighten your ranges, and move in and out of pools as market conditions shift.

✅ Pros:​

  • Higher yield potential
  • Greater control and flexibility
  • Lower cost to adjust positions

📈 Example Strategy:​

  • Protocol: Orca Whirlpools (Solana)
  • Pair: SOL/USDC
  • Range: Narrow (e.g., $130–$150)
  • Approach: Monitor daily and reposition to stay in range

🤔 When to Use:​

  • You/re comfortable managing your LPs actively
  • You want to maximize fee capture
  • You don/t mind trading some time for more yield

🧠 Concentrated Liquidity​

Concentrated LPing lets you target a specific price range - increasing your capital efficiency, but also increasing risk if price moves out of range.

Solana protocols like Orca and Lifinity, and Ethereum/s Uniswap V3, all support this model.

✅ Pros:​

  • High capital efficiency
  • Better returns when price stays in range

📈 Example Strategy:​

  • Platform: Orca Whirlpools
  • Pair: SOL/USDC
  • Range: $125–$145
  • Approach: Actively monitor and reposition as needed

🤔 When to Use:​

  • You/re confident in short-term price range
  • You want to optimize every dollar of liquidity
  • You/re okay with active maintenance

📊 Range Selection: Narrow vs. Wide​

Range TypeFeesMaintenanceIL RiskBest Use Case
NarrowHighHighHighActive LPs with conviction
WideLowerLowLowerPassive LPs on Ethereum

Rule of thumb:

  • Use narrow ranges when you can monitor your position often (Solana, Orca)
  • Use wide ranges when you want to reduce gas costs or rebalance infrequently (Ethereum, Uniswap)

🔁 Rebalancing Tools​

On Solana, you can rebalance manually or use analytics tools like:

On Ethereum, automated vaults (like Arrakis, Gamma, or Automated Ranges from Uniswap LP managers) may help reduce the burden of manual gas-heavy updates.

✅ Choose Your Strategy​

You Want...Go With...
Low effort, long-term returnsPassive LPing on Uniswap (ETH)
Fast rebalancing and fine controlActive LPing on Orca (Solana)
To optimize every dollarConcentrated LPing on Solana or ETH
Minimize ILUse wide ranges or stablecoin pairs

🔷 Ethereum LP Strategies​

Ethereum is home to some of the most advanced and battle-tested DEXes. Higher gas fees make concentrated liquidity and efficient range strategies especially important here.

🔶 Solana LP Strategies​

Solana offers low fees and lightning-fast speed - ideal for active LPing and experimenting with new strategies. Many DEXes on Solana support concentrated liquidity and unique incentives.

📘 Tip: Not all DEXes behave the same. Some are built for stablecoins, others for volatility. Use this guide to match your strategy to the right protocol.

👉 Compare Solana vs Ethereum → 👉 Strategy: The LP Flywheel Strategy