Introducing Whirlpools: Concentrated Liquidity on Orca
Say hello to better prices on trades and the opportunity to compete for higher yields!
Introducing Whirlpools: Our next-generation AMM!
Using the power of concentrated liquidity, Whirlpools provide higher yields for the savviest LPs (or, as we like to call them, sharks đŚ) and better rates for everyone. On March 23, Whirlpools will pave the way for Orca to become the apex predator of AMMs!
What is concentrated liquidity?
On Orcaâs current poolsâas in all constant product AMMs, which make up the majority of DEXs in DeFiâliquidity in any given pool facilitates trades at any price. While this model is simple, it is not capital-efficient. Trades suffer from high slippage, and the unused capital limits yields for liquidity providers.
Whirlpools solve this problem by allowing LPs to concentrate their liquidity in specific price ranges. LPs who provide deeper liquidity for the range in which trades actually occur will earn a higher share of fees and rewards, encouraging a more efficient use of capital. Whatâs more, the deeper liquidity around the actual price of the pair means traders face lower slippage costs too.
While the LP side will become more competitive, the Orca swap UX you know and love remains unchanged⌠with the exception of better prices! đ¸
When will Whirlpools launch?
On March 23, weâll launch the Orcanauts Beta! During this time, weâll launch our first three Whirlpools: SOL/USDC, ORCA/USDC, and mSOL/USDC. (Rewards for those pools will begin 24 hours later, along with the regularly scheduled Aquafarm Rotation on March 24).
For the first 2 weeks, liquidity provision (and the associated incentives) will be limited to holders of our Orcanaut NFTs. So if you want to be one of the first to try Whirlpools, make sure youâve nabbed a ânaut (available on NFT marketplaces) and gained entry to the #orcanautical Discord channel! đł
Additionally, Whirlpools will not take any fees for the Orca Treasury upon launch. This will increase yields for LPs and lower prices for traders, which will in turn support the long-term growth of the protocol. However, this could change in the future as a function of governance.
Who should provide liquidity for Whirlpools?
In short: Anyone who has a strong point of view on crypto markets, a high tolerance for risk, and the desire to compete for yield.
Letâs say you expect the price of SOL to fluctuate between a range of $91 â $120 over the next month and provide liquidity in that range in the SOL/USDC Whirlpool. If you are correct, youâll earn 14.97x more fees and rewards than before â at the risk of increased divergence loss.
As you may have gleaned by now, concentrated liquidity provision is a skills-based exercise. However, weâre excited by the potential for Whirlpools to democratize this exercise. Unlike other chains, Solanaâs minimal transaction fees allow anyone with a perspective on the market to try their fin at becoming a shark. In fact, we encourage any first-timers to start out with small deposits, so any potential shipwrecks occur only on a small scale. đ
Is the smart contract custom? Can I build on top of it?
Yes and yes! The Whirlpools smart contract was written entirely from scratch by Orcaâs industry-trained engineering team. Weâve designed the contract especially for the Solana virtual machine, with a special emphasis on security and efficiency. Weâve also introduced a number of new ideas, including an optimized implementation for 256-bit numbers.
Concentrated liquidity AMMs are conceptually one of the most sophisticated ideas in crypto, and weâre confident that the quality of our smart contract will speak for itself.
The smart contract is undergoing a double audit by Kudelski and Neodyme. We will open-source the contract and share the reports once both audits are complete.
Whirlpools are founded upon our belief that concentrated liquidity will eventually power the majority of trading volume in DeFi. Soon, weâll invite other protocols to be a part of that future via our Builders Program, a grants program specifically for protocols built on top of Whirlpools. Interested? Get ready now: The Whirlpools TypeScript SDK will be open-sourced along with the beta release!
Will Whirlpools work when the Solana network slows down?
Yes! Similar to constant product AMMs, both swaps and liquidity provision on Whirlpools can be completed in only a single transaction. This is a major improvement over competing capital-efficient DEXes. In order books, for instance, the multiple transactions required to settle a single order makes trading less reliable (and more confusing).
Access to decentralized markets that are both resilient and capital-efficient will be good not only for Orca, but for the wider Solana ecosystem. During periods of volatility, the best centralized exchanges outperform their competitors by maintaining uptime and limiting unnecessary cascading liquidations. Similarly, weâve designed Whirlpools to shine by providing superior service when the Solana network sees a spike in activity.
Think you might want to be a shark? During the Orcanauts Beta period, weâll be making regular dives into the #orcanautical channel in the Orca Discord to hear your thoughts. Weâll also encourage our podmates to help one another learn the art of concentrated liquidity provision! Stellar contributions, such as YouTube or Twitter guides that help others learn to LP, may be rewarded with swag⌠đ
Weâll be releasing more details during the run-up to the Beta. Follow our Twitter for the latest, and donât forget to adopt an Orcanaut to be among the first to try Whirlpools! đŚ
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 recipientâs financial needs. We have not conducted any financial assessment based on the personal circumstances of any recipients. All persons are encouraged to seek their own independent financial advice prior to taking any further action.
