Comment on page
How to Supply (and Remove) Liquidity
Once you’ve chosen your vault and token, it’s time to add liquidity.
There are three main methods to supply liquidity. All three ultimately achieve the same result and are interchangeable, so you can join with one and exit with another.
There are two single token methods:
- Float and Stable deposits are matched together and sent into the pool.
- Withdrawals are honored with existing deposits
- With Slippage:
- Your deposit/withdrawal is partially swapped to create the proportions required.
And one magic two token method:
- Hybrid Add/Burn:
- Your 50/50 mix of tokens is virtually sold to become either Float or Stable
- Or your Float/Stable share is extracted in its “native” 50/50 distribution
Here is everything you need to know about each:
This is the simplest and cheapest way to join Pylon pools. The system holds an outside reserve in Float and Stable tokens. When you supply either Float or Stable, the system looks if there’s enough reserves on the other side to get matched at the correct ratio for the underlying AMM. For Zircon, the correct ratio is always 50/50, meaning that each side has the same dollar value.
If the system finds a match, it mints liquidity for the AMM. Otherwise it holds your deposit in the hopes of being matched by someone else.
This method has no slippage losses and has a very low fee (dynamically calculated, but usually within 0.10%).
If the demand for Float and Stable is evenly matched, everything is great. But this won’t always happen, so there need to be alternatives.
When you try to add liquidity to the side whose regular reserves are full, you will automatically use this method (depending on reserves, it might be applied only to a part of the deposit).
This method simulates selling half of your deposit against the AMM pool, and supplying liquidity with the result. Because trades with an AMM involve slippage losses, this method also applies slippage.
Similarly, when withdrawing liquidity, your share is counted as a 50/50 mix of Float and Stable tokens. Removing only one of them upsets the balance, resulting in a price change and slippage.
For small amounts the slippage loss will be insignificant, while very large operations can result in 10% slippage or more. The UI will usually prevent users from doing this, as it results in unnecessary losses.
For large operations, the hybrid methods come to the rescue!
This method is the secret sauce that makes Zircon so awesome!
With Hybrid Add, you will supply tokens in a 50/50 distribution, e.g. 1 ETH and $1,000, and receive only the Float or the Stable shares in return.
Once inside the system, your original deposit is treated as all Float or all Stable. In our example, when you withdraw, you’ll be able to get it either as 2 ETH if you chose Float, or $2,000 if you went for the Stable (assuming that there are enough reserves).
There’s no actual AMM swap happening. It’s just an “accounting trick” made possible by pooling Pylon deposits. Because of this, this method has no slippage and is effectively a way to concentrate liquidity around the current price.
Hybrid Add/Burn are very powerful swapping tools that can result in a lot of losses from frontrunning and MEV, which is why they have a special fee system.
The Hybrid mode fee has a high base fee component at 0.30%, and an additional dynamic fee proportional to the price changes in the past few minutes.
E.g. If the price pumps by 1% in a block, the total fee will be 1.30%.
In normal usage, price changes are unlikely to be this large, and slippage controls will ensure you don’t overpay due to sudden changes.
The mechanism exists to protect LPs from MEV and toxic flow, and is designed to ensure the pool will always get arbitraged through regular swaps first.