The Rise of Orca Whirlpools

    Question:

    Orca Whirlpools are a way to provide concentrated liquidity in specific price ranges on Orca (the leading decentralized exchange on Solana). This allows for higher capital efficiency than a standard AMM design (think Uniswap V3).

    Create a dashboard highlighting the growth of Orca Whirlpools over time. What pools have risen in popularity and generated the most fees for liquidity providers?

    How often are LPers moving in and out of their positions in order to adjust for specific price ranges?

    How has the launch of $BONK changed the popularity of these pools and are users now experimenting with other pools?

    Optionally, show if LPers are adjusting liquidity more frequently on Orca than on Uniswap.

    Solana & Orca Whirlpools:

    Solana is an open-source, public blockchain that supports smart contracts, peer-to-peer tokens (NFTs), and a wide range of decentralized applications. Coin is a native of the Solana SOL network, which, in addition to the role of exchanges, is also used to secure the network through staking or depositing. Solana network has the ability to process 50 to 65 thousand transactions per second. For this reason, it considers itself a serious competitor for Ethereum.

    The core of Solana's scalability solution is the use of a decentralized time clock called Proof of History (PoH). This technology is presented in order to solve the problem of time in distributed networks where there is no centralized and trusted entity. Proof of history using Verifiable Delay Functions allows each node in the network to generate timestamps locally using SHA256 hash calculations.


    > On Orca’s current pools—as in all constant product AMMs, which make up the majority of DEXs in DeFi—liquidity 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. What’s more, the deeper liquidity around the actual price of the pair means traders face lower slippage costs too.

    > Unlike standard pools, liquidity providers in Whirlpools will compete for trading fees and token emissions, which are divided among liquidity providers according to the parameters of their deposits. Due to the structure of Concentrated Liquidity and Leverage, users who set a tighter price range, around the current token price will receive a higher share of fees and incentives. > > From Medium article and Docs of Orca

    Methodology:

    The data provided by Flipside has been used to handle this analysis. The steps of this investigation have been introduced as below:

    • Step 1: Find out the Orca program and pools
      • Orca Whirlpools programPROGRAM_ID='whirLbMiicVdio4qvUfM5KAg6Ct8VwpYzGff3uctyCc'
      • Poolsfrom solana.core.dim_labels where LABEL_TYPE='dex' and LABEL_SUBTYPE='pool' and LABEL='orca'
    • Step 2: Add and remove liquidity from Orca Whirlpools
      • Metrics→ Count of LP actions, Users made LP actions, USD volume of actions, Average and median volume of actions, LP action per user and volume of LP action per day
    • Step 3: Behavior of Liquidity providers
      • Metrics→ Distribution of LP users by count of LP actions and volume of provided LP in USD, Time difference between add and remove liquidity and Crossover with other programs on Solana ecosystem
    • Step 4: Top liquidity pools on Orca Whirlpools
      • Metrics→ Top liquidity pools by USD volume of provided LP and count of LP actions and users on these top pools
    • Step 5: Impacts of $BONK launch on Orca Whirlpools
      • Metrics→ Re-structure of top liquidity pools after $BONK launch over time
    • Step 6: Comparison of Orca Whirlpools with Uniswap V3
      • Metrics→ all metrics of step 3
    • Step 7: By aggregating the outcomes of the steps and deep dive into the Orca Whirlpools, draw a conclusion about the activity of these pools on Solana ecosystem.

    Part 1: Stats of Orca Whirlpools (General and over time)

    Findings:

    Finally compare the frequency and behavior of liquidity providers on Orca Whirlpools and Uniswap V3:

    • On Uniswap V3, the most dominant group of liquidity providers add liquidity just for one time and the outcomes are same as the Orca Whirlpools.
    • The provided liquidity on Uniswap V3 has been dominated by volume above 1k USD and its quite difference with Orca Whirlpools and shown that the investment strength on Uniswap V3 is more than Orca Whirlpools.
    • The average time between first two liquidity providing actions on Uniswap V3 is more than Orca Whirlpools.

    Part 2: Behavior of Liquidity providers and top liquidity pools on Orca Whirlpools

    Findings:

    The first part of this investigation concentrated on the general and over time metrics related to the Orca Whirlpools stats**:**

    • According to the outcomes of this part, the LP actions used for remove liquidity from Orca Whirlpools is more than adding liquidity.
    • The average and median volume of adding liquidity on Orca Whirlpools is more than removing liquidity actions as can be seen.
    • The LP actions per user is of the most important metrics defined and used in this investigation and according to the outcomes, the LP actions per user for adding liquidity on Orca Whirlpools is more than remove liquidity actions.
    • The next sub-part of this section demonstrated the liquidity providing action by various metrics.
    • The count of adding liquidity on Orca Whirlpools has been followed the increasing pattern since last days of July 2022 and after that date sudden decrement occurred but since start of new year and in the first week of January the highest count of adding liquidity actions happened on Orca Whirlpools
    • The volume of provided liquidity on Orca Whirlpools reveals that the highest USD volume of adding liquidity occurred on the first week of May 2022 and after the Terra collapse and its impacts on crypto market followed the decreasing movement but since start of new year and launch of $BONK token the volume of added liquidity on Orca Whirlpools increased as can be seen.

    Findings:

    The most important part of this investigation is about the behavior of Liquidity providers on Orca Whirlpools:

    • Most of the liquidity providers on Orca Whirlpools are first time liquidity provider as can be seen. Also the dominant volume of providing liquidity on Orca Whirlpools is under 50 USD and the count of liquidity providers decrease with increasing the volume of providing liquidity and its shown the investment strength of users.
    • The liquidity providers on Orca Whirlpools exit the positions within the first 12 hours of opening position and its the most dominant group of add/remove liquidity time difference.
    • The SOL-USDC and SOL-stSOL are two of the most popular Orca Whirlpools according to the all time provided liquidity stats.
    • The most popular program beside Orca Whirlpools for LPers is Raydium liquidity pool V4.

    Part 3: $BONK launch and its impacts on Orca Whirlpools

    Findings:

    BONK, the new meme coin in the crypto industry billed as Solana's first dog coin and launched on December 25, 2022. This launch has affected the Orca Whirlpools stats and most popular liquidity pools on it:

    • Since launch of $BONK token, the count of provided LP on Orca Whirlpools changed and the BONK-SOL pool became the second most popular liquidity pool.
    • The USD volume of provided liquidity on Orca Whirlpools after launch of $BONK token revealed the domination of pools including $BONK token like BONK-SOL and BONK-USDC pools. Also, this domination has been proofed by count of liquidity providers, too.
    • The highest count and volume of liquidity providing on Orca Whirlpools by $BONK tokens happened on the first week of January 2023.

    Part 4: Comparison of Orca Whirlpools with Uniswap V3

    Conclusion:

    Using the power of concentrated liquidity, Whirlpools provide higher yields for the savviest LPs. By considering the outcomes related to the Orca Whirlpools the following statements could be concluded:

    • Considering the advantages of adding liquidity on Orca Whirlpools and concentrate their liquidity in specific price ranges., the trend of application of Orca Whirlpools has increased appreciably. It should also be noted that various events have a great impact on the investment process.
    • For example, the Launch of $BONK token has caused tremendous changes in the structure of the most popular pools on Orca Whirlpools and the main reason of that is the increasing price of $BONK token. Also Solana network has gained considerable popularity after that event and pools related to SOL has increasing pattern too.
    • One of the most important and most influential events on the liquidity providing on Orca Whirlpools is the price changes its because the inherent property of these Orca Whirlpools is based on real prices.

    Author:

    Credited by MZG

    Discord handle: m.zamani#0361

    Twitter handle: @GargariZamani

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