Step-by-Step Guide to Providing Liquidity
Step-by-Step Guide to Providing Liquidity
This page provides a detailed, step-by-step guide to providing liquidity on Zeitgeist's prediction narratives using Meteora's Dynamic Liquidity Market Maker (DLMM).
Before You Begin:
Make sure you have a Solana-compatible wallet (e.g., Phantom, Solflare) connected to Zeitgeist.
Make sure you have some SOL in your wallet to cover transaction fees.
Make sure you understand the basics of DLMM (bins, active bin, liquidity shapes) – review the "Understanding DLMM" page if needed.
Make sure you understand the risks of liquidity provision, especially impermanent loss – review the "Introduction to Liquidity Provision" page.
Step 1: Choose a Narrative
Navigate to the "Markets" or "Browse" section of the Zeitgeist platform.
Select the prediction narrative you want to provide liquidity to. Consider factors like:
Your understanding of the narrative.
The narrative's expiration date.
The current trading volume and liquidity.
The potential for earning fees and rewards.
Click on the Narrative Card to access the Narrative Details page.
Step 2: Choose YES or NO: Aligning with Your Prediction
DLMM allows for single-sided liquidity provision. This means you need to decide whether you want to provide liquidity for YES shares or NO shares. This choice should align with your belief about the likely outcome of the narrative:
If you believe the outcome will be YES: Provide liquidity for YES shares. You'll be selling YES shares to users who are buying them.
If you believe the outcome will be NO: Provide liquidity for NO shares. You'll be selling NO shares to users who are buying them.
Step 3: Select "Provide Liquidity" On the narrative page, select "Provide Liquidity."
Step 4: Selecting Bins: Defining Your Price Range(s)
This is where you define at what prices you're willing to provide liquidity. Remember that DLMM uses bins, which represent single price points.
Choose Your Side (Again): Select either the "YES" or "NO" tab, depending on which type of shares you're providing.
The Bin Interface: You'll see an interface that allows you to select bins. This interface might look like:
A price chart with selectable price points.
A list of available bins with their corresponding prices.
A numerical input field where you can manually enter the desired bin price(s).
(Screenshot: Show the bin selection interface on Zeitgeist.)
Selecting Bins:
Single Bin (Spot Shape): Click on a single price point to select a single bin. This concentrates all your liquidity at that price.
Multiple Bins (Curve, Bid-Ask, Flat): You can select multiple bins. How you select them depends on the liquidity shape you choose (see Step 4). The interface will usually guide you through this process.
Price Considerations:
Bins above the current market price: You're essentially setting "sell" orders for your shares (if providing YES) or setting buy NO at lower prices.
Bins below the current market price: You're essentially setting "buy" orders, by providing NO shares at lower YES price, to eventually get YES shares.
Step 5: Choosing a Liquidity Shape: Matching Your Risk Tolerance
Before (or after, depending on the interface design) you select your bins, you'll need to choose a liquidity shape. This determines how your liquidity will be distributed across the bins you select.
Select a Shape: Choose from the available options:
Spot: All liquidity in a single bin. Highest risk, highest potential reward.
Curve: Liquidity distributed across multiple bins, following a curve. Balanced risk and reward. Recommended for beginners.
Bid-Ask: Liquidity concentrated on both sides of the current price. Good for capturing volatility.
Flat: Liquidity evenly distributed across a specified range. Lowest risk, lowest potential reward.
Visualize the Shape: The interface should provide a visual representation of the selected shape, showing you how your liquidity will be distributed across the bins.
(Screenshot: Show the liquidity shape selection interface, with a visualization of each shape.)
Understand the Implications: Review the explanations of each shape (provided on the "Understanding DLMM" page) to make sure you choose the one that best aligns with your strategy and risk tolerance.
Step 6: Specifying the Amount: How Much Liquidity to Provide
Enter the Amount: Enter the number of shares you want to provide as liquidity.
Available Balance: The interface will show you your available balance of YES or NO shares (depending on your selection in Step 2). You can't provide more liquidity than you have in your wallet.
(Screenshot: Show the liquidity amount input field.)
Step 7: Setting Confidence (Optional): Influencing Your OSSR
Zeitgeist may offer an optional "Confidence Score" feature as part of the Outcome-Specific Staking Rewards (OSSR) system.
Confidence Score Input (If Available): If this feature is enabled, you'll see an input field (e.g., a slider or a numerical input) where you can enter your "confidence score" (e.g., on a scale of 1-10).
Understanding the Impact:
A higher confidence score, if your prediction is accurate, will increase your OSSR rewards.
A higher confidence score, if your prediction is inaccurate, will decrease your OSSR rewards (or potentially result in a larger penalty).
This is how to increase rewards.
Choose Carefully: Only use this feature if you understand the risks and rewards. If you're unsure, it's best to skip this step or enter a low confidence score.
(Screenshot: Show the confidence score input field.)
Step 8: Reviewing and Confirming Your Transaction
Review All Details: Before confirming, carefully review all the details of your liquidity provision:
Narrative
YES or NO shares
Selected Bin(s)
Liquidity Shape
Amount of Liquidity
Confidence Score (if applicable)
Estimated Fees (you'll earn, not pay, these as LP)
Confirm on Zeitgeist: Click the "Provide Liquidity," "Confirm," or similar button on the Zeitgeist interface.
Wallet Approval: Your Solana wallet will prompt you to approve the transaction. Review the details (including the gas fee) and click "Approve."
(Screenshot: Show the wallet approval screen for a liquidity provision transaction.)
Transaction Confirmation: Once the transaction is confirmed on the Solana blockchain, your liquidity will be added to the market. You'll see a confirmation message on the Zeitgeist interface, and your LP position will be displayed in your portfolio or on a dedicated "Liquidity" page.
Step 9: Understanding Gas Fees (Solana)
What are Gas Fees?: Gas fees are small payments (in SOL) required to execute transactions on the Solana blockchain. They compensate the validators who process and secure the network.
Solana's Low Fees: Solana is known for its very low gas fees, typically just a fraction of a cent.
Fluctuating Fees: Gas fees can fluctuate based on network congestion. During periods of high demand, fees might be slightly higher.
Estimating Fees: Your wallet will show you an estimated gas fee before you approve the transaction.
Insufficient Funds: If you don't have enough SOL in your wallet to cover the gas fee, the transaction will fail.
By following these steps, you can successfully provide liquidity to Zeitgeist's prediction narratives and start earning trading fees and staking rewards. Remember to monitor your positions and adjust your strategy as needed.
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