Beginner's Guide to Liquidity

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What is liquidity provision?

• You deposit SOL and USDC into a pool.
• Traders may swap SOL for USDC, or USDC for SOL, using liquidity in that pool.
• If swaps use your active liquidity, you may accrue a share of fees.
• When you withdraw, you receive the tokens represented by your position, which may differ from the tokens and amounts you deposited.

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Why provide liquidity?

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Understanding concentrated liquidity

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Traditional vs concentrated liquidity

• Simpler range setup
• Liquidity remains active across the full supported price range
• Liquidity is less concentrated around the current price

• Liquidity is more concentrated within the selected range
• Position only accrues swap fees while in range and used by swaps
• Requires choosing and reviewing a price range

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What this means for you

• You may accrue fees only when the pool price is within your selected range and swaps use your liquidity
• Narrower ranges concentrate liquidity but may move out of range more quickly
• Wider ranges spread liquidity across more prices and may require less frequent range adjustment

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Before you start

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Prerequisites

1. A Solana wallet — Such as Phantom or Backpack
2. SOL for transaction fees — Keep SOL available for transaction fees and any required account costs
3. Tokens to deposit — You usually need both tokens in the pair, such as SOL and USDC

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Important concepts to understand

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Choosing a pool to review

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Common pool types

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Pools that may require additional review

• Low-liquidity pools — May have higher price impact, slippage, and less predictable withdrawal or swap conditions
• New or meme tokens — May have higher volatility, liquidity, and token risk
• Unfamiliar pairs — May require more review to understand token behavior and pool conditions

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Your first liquidity position

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Option 1: Full-range position

• Users who want a simpler range setup
• Users learning how liquidity positions work
• Users who do not want to choose a custom range

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Option 2: Custom range position

• Users who want to choose a specific price range
• Users who plan to review and manage the position
• Users who want to model different range widths

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How to choose what to review first

Are you new to DeFi liquidity?
├── Yes → Review the Full-Range Position Guide first
└── No → Review whether you want a full-range or custom-range setup

Do you want to choose a specific price range?
├── Yes → Review the Custom Range Position Guide
└── No → Review the Full-Range Position Guide

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Step-by-step: opening a position

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Step 1: Navigate to the pool

1. Go to orca.so.
2. Connect your wallet.
3. Click Pools in the navigation.
4. Search for the token pair you want to review, such as SOL/USDC.
5. Click the pool to open it.

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Step 2: Click New Position

1. On the pool page, click New Position.
2. The position creation interface will open.

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Step 3: Choose your range

• Click Full Range.
• Your range will cover the full supported price range.

• Set your minimum price, or lower bound.
• Set your maximum price, or upper bound.
• Review whether the current pool price is within your selected range.

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Step 4: Enter your deposit amount

1. Enter the amount of one token.
2. The other token amount will be calculated for in-range positions.
3. Check that you have sufficient balance.
4. Review the deposit amounts before continuing.

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Step 5: Review and confirm

1. Review the position summary:
   • Tokens being deposited
   • Price range
   • Fee tier
   • Estimated amounts
2. Click Add Liquidity.
3. Review the transaction details in your wallet.
4. Approve the transaction if the details are correct.

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Step 6: After confirmation

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After opening your position

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Monitor your position

• Position range
• Token composition
• Accrued fees
• Whether the pool price is in range
• Pool activity and market conditions

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Harvesting fees

1. Go to your position in Portfolio.
2. Click Harvest.
3. Review the transaction details.
4. Approve the transaction.

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When users may review a position

• Price moves outside the selected range
• The position is no longer accruing swap fees
• Token composition changes significantly
• Market conditions change
• The user wants to withdraw or create a different position

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Common beginner questions

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What if the price moves outside my range?

• Leave the position as-is and wait to see whether price returns to range
• Withdraw the position
• Create a new position with a different range

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Can I lose money?

• Impermanent loss compared with holding
• Token price declines
• Out-of-range positions that stop accruing swap fees
• Fees that may not offset losses or costs
• Smart contract risk
• Slippage and transaction costs when adding or removing liquidity

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How much should I deposit?

• Transaction fees and required account costs
• Your risk tolerance
• Pool liquidity and price impact
• Whether you want to keep funds outside the position
• The possibility of impermanent loss or token price movement

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How often should I check my position?

• Full-range positions may require less frequent range review
• Narrow custom ranges may require more frequent review
• Wider custom ranges may require less frequent review than narrow ranges

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Understanding position outcomes

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What may accrue

1. Trading fees — Your share of fees from swaps that use your active liquidity
2. Token rewards — Some pools may offer additional token rewards

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What affects fee and reward accrual

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Risks to understand

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Impermanent loss

• You may end up with more of one token and less of the other
• Your LP position may be worth less than simply holding the deposited tokens
• Fees and rewards may not offset impermanent loss

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Smart contract risk

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Price risk

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Range risk

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Next steps

1. Review position types — Full-Range Guide or Custom Range Guide
2. Learn about fees — Understanding Trading Fees
3. Understand IL — Impermanent Loss Explained
4. Manage your positions — Portfolio Management

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Glossary