Whirlpools FAQs

What are the risks and incentives of Whirlpools over regular pools?

Unlike standard pools, liquidity providers in Whirlpools will compete for trading fees and token emissions, which are divided among liquidity providers according to the parameters of their deposits. Due to the structure of Concentrated Liquidity and Leverage, users who set a tighter price range, around the current token price will receive a higher share of fees and incentives. They are, on the other hand, more vulnerable to Divergence Loss (also known as Impermanent Loss or IL).

What tokens represent my deposit?

In a standard AMM pool, Liquidity provider (LP) tokens represent how much of the total liquidity of a pool is owned.
As users deposit liquidity, their original tokens go into the pool and they mint LP tokens in an equivalent amount, increasing both the liquidity in the pool and the total supply of LP tokens. As users withdraw liquidity, they burn their LP tokens and receive their original tokens back according to the balance of the pool (which may go up or down depending on the relative price of tokens), decreasing both the liquidity in the pool and the total supply of LP tokens.
As all liquidity in standard pools has the same zero-to-infinite range and no multiplier, all LP tokens are the same, which makes them fungible. In Whirlpools, each liquidity provider decides the range and amount of liquidity deposited into the pool, making each LP token unique, and therefore non-fungible.

What is the Whirlpools NFT? Can I sell it?

The Whirlpools NFT is an LP token that represents a given position in Whirlpools.. It is technically possible to trade the Whirlpools NFT on a secondary marketplace. However,you should be aware that by selling it, you are also selling your liquidity and will not be able to retrieve your tokens.
When closing your position and withdrawing all liquidity, you can choose NOT to burn your NFT and keep it in your wallet. At this point, the NFT no longer represents any liquidity.

How do price ranges work?

Traditional pools have liquidity providers provide liquidity across the entire possible price for a token, from zero to infinity. When participating in a Whirlpool, each user can choose the upper and lower limit for their liquidity. It is worth noting the limits are not arbitrary: users must choose between a set of evenly distributed discrete ticks.

How are the preset price ranges calculated, and how do you create a custom range?

Preset price ranges are currently based on the 30-day minimum and maximum prices for each pool’s token pair. For conservative range, the lower end of the price range is the minimum divided by 2.5, and the upper price is the maximum, multiplied by 2.5. For the standard range, the lower price is the minimum divided by 1.75, and the upper price is the maximum, multiplied by 1.75. We plan on continuing to iterate on how we calculate the preset price range based on user feedback.
Custom ranges may be created according to the user’s personal preferences, depending on a variety of factors: frequency in which they wish to check their position, confidence in price movement, expected token volatility, and preferred exposure to risk. The more often the user is willing to manage their portfolio, the tighter they can make the range, as they can adapt to price movements and reposition as they happen.

What happens if the price goes above or below my limit?

As users swap tokens against a given pool, the price of the token pair in the pool and the balance of tokens in the pool will change continuously.
This applies to Whirlpools positions, but only when the price is within the set range. If the price of token A moves above the established limit, all of the A tokens will have been sold for token B. If the price of token A moves below the established limit, all of the B tokens will have been sold for token A. When that happens, users are no longer providing liquidity in the pool, and so they will receive no incentives or swapping fees. Once the price goes back within the range, liquidity, incentives and swapping fees are reestablished.

How can I provide liquidity again once that happens?

If the price has moved beyond the established limits, the decision is up to each user whether to wait for it to return to the price range (if expected) or provide liquidity in a new range.
Should they wish to reset their range, they will need to rebalance. This is done by pulling liquidity and redepositing within a new range. Since the tokens withdrawn and deposited may not be in a 50/50 ratio, it may be necessary to perform a swap in order to redeposit in the newly selected price range.

Will Whirlpools mitigate Divergence Loss?

No. Whirlpools increase Divergence Loss according to the position’s Leverage. The tighter the range, the greater the Leverage and the Divergence Loss.
However, Whirlpools allow users to deposit less liquidity and get the same or higher yield due to the multiplier. Choosing a level of leverage, however, up to each individual’s discretion.

Why isn’t the deposit ratio 50/50 for custom ranges?

The deposit ratio for a Whirlpools position depends on the price range set for that position. The larger the difference between the (lower bound and current price) and (upper bound and current price), the more imbalanced the deposit ratio will be.

How is the Leverage shown in the UI calculated?

In this formula, Pu is the upper price, and Pl is the lower price of the price range.

How are Whirlpools different from Uniswap V3?

Besides the obvious advantages for users of lower transaction fees and quick transactions for Solana users, Whirlpools have:
  • A simpler, more guided UX for concentrated liquidity provision
  • An entirely custom smart contract designed for the Solana virtual machine, which will be open sourced along with the public release (and after audits are completed)
  • Built-in yield farming — a first for any concentrated liquidity AM

How do Whirlpools impact the swap experience on Orca?

Fear not—the Orca swap experience you know and love is not going away! As a trader, there is nothing you need to do to take advantage of the deeper liquidity provided by Whirlpools; all the magic happens behind the scenes.

Will standard pools and Double Dip pools disappear with the introduction of Whirlpools?

Standard pools and Double Dip pools will continue to exist for the time being, but incentives such as emissions will gradually migrate to Whirlpools. Eventually, standard pools may be deprecated, but there are no concrete plans.

How do rewards change from standard pools to Whirlpools?

Rewards will continue to be determined for each pool and Whirlpool individually and change with each Aquafarm Rotation.

As a liquidity provider, how much of the rewards will I earn?

A fixed amount of rewards is distributed for each Whirlpool every second according to the weekly distribution rate for that pool. Those rewards are earned by liquidity providers in a ratio directly proportional to the amount of liquidity they have in the current tick.
For example, if 1% of the liquidity in the current tick was deposited by you, you will earn 1% of the rewards distributed every second.

Will the existence of Whirlpools reduce the fees earned for standard pools?

Swaps will be routed to whichever pool provides the best rates. Ultimately, we expect the deeper liquidity provided by concentrated liquidity to mean that most fees are earned by LPs in Whirlpools.

What is the fee structure for using Whirlpools, and are there different fee rates for different pairs?

Initially users will pay 0.25% to swap, 3% of which goes to the impact fund, and 97% goes to the liquidity provider. Later on, the fees may be determined individually for each pool.

How do I track PnL (profit and loss) after providing liquidity in Whirlpools?

The first tip is to decide whether you’d like to track PnL (profit & loss) in terms of the tokens themselves, or relative to USD. Then, keep track of the values of the tokens during your initial deposit (if you did not do this, look for your deposit transaction using a blockchain explorer). You will also need to keep track of yield harvested and any further deposits.
Providing you have this data, the formula to calculate your PnL (Profit and Loss) is fairly simple:
PnL = Final Value of Position + Accumulated Fees and Rewards - Initial Value of Position
Disclaimer: The content of this communication is not financial advice and should not be relied on by any persons as financial advice. This communication has not been provided in consideration of any recipient’s financial needs. We have not conducted any financial assessment based on the personal circumstances of any recipients. Before using the protocol, carefully review all relevant documentation and consider risks including total loss of funds.