Application Case: USDC-ETH 0.3%

As we mentioned in the previous article, with LP Analytics, users can find the most profitable LP and the data of their brilliant strategies. In addition to this, users can also use LP rankings as a performance contrast tool to improve their strategies and make the right investment decisions. When users feel unsure about their strategies, they can find two or more relative LPs on the LP ranking lists and contrast their performances with each other.

Application case: How to choose intelligently

The first step is to find comparable LPs who provide a similar amount of liquidity in the same pool. We will use comparable LPs in the USDC-ETH 0.3% pool as an example. (We recorded this data at 8: 38 PM UTC+0, Dec. 7th, 2021.)

These two LPs have provided a similar amount of liquidity, but their net profits significantly differ. You can look into their LP reports to compare the differences between their performances.

We can see the first LP moves more frequently. With a price range between $2489.9-$4817.3, this LP moves 29 times during 90 days.

The performance of LP no.1

And LP no.2, who set the price range between $903.3-$6988.1, only moved seven times in 197 days. It makes sense when you select a wider price range. But it also means worse capital efficiency and lower returns.

The performance of LP no.2

As a general rule, the narrower the ranges are, the better the capital efficiency is, the more frequently LPs need to update and rebalance, the more likely they will get exposed to IL and high gas fees. Our first LP has dealt with more difficulties in operation and earned more returns. This LP has been proved to be a good liquidity provider.

By comparing the performances of LPs, you can pick a winner who outperforms others. After finding the skilled LP, you can navigate to the address page of the LP and view more transaction details. And it is your decision to follow it or not.