Liquidity provision

Liquidity provision is an operation similar to swapping. The primary difference is that the counter-asset in the operation is always the pool's own LP token: it is received when minting (adding liquidity) and sent when burning (removing liquidity).

A key nuance of the LP token is that it represents a share of the entire pool, rather than being a component of its collateral. Therefore, it is not assigned a deviation metric. Consequently, deviation fees and cashbacks do not apply to the LP token itself.

Another key feature of LP token minting and burning is that these operations can be performed with multiple assets simultaneously.

Providing a large amount of liquidity, especially an amount comparable to the pool's TVL, using only a single asset will incur a huge deviation fee. However, the TWMM allows for multiple assets to be provided simultaneously in a single transaction. If these assets are deposited proportionally to the target weights, or in a combination that reduces the overall pool deviation, the fees are calculated based on the net effect of the entire operation, which can result in a significantly lower cost.

Due to this, liquidity provision operations can be executed in two ways:

• Single-Asset Liquidity Provision: Allows for minting or burning LP tokens using a single asset. This approach is efficient for small amounts or when used in conjunction with execution strategies like TWAP or limit orders, as the operation can be timed to decrease deviation and thus incur lower fees.

• Multi-Asset Liquidity Provision: Ideal for large amounts, as deviation fees and cashbacks are calculated based on the net deviation change created by all assets together. This is a key distinction, as the pool's TVL—which is the denominator for share calculations—is also changing during the operation.

Slippage rate and price maximisation

Similarly to swapping, you can specify a range of values for liquidity provision to manage rapidly changing market conditions. The implementation differs slightly for single-asset and multi-asset operations.

For single-asset liquidity provision, the mechanism works straightforwardly and is identical to a ranged swap.

For multi-asset minting or burning, the range operation increases or decreases the amounts of all assets involved, proportional to the user-specified ratios.