Just-in-Time (JIT) Liquidity vs Persistent Liquidity

Dynamic capital allocation: LPs provide liquidity only for the exact duration of a trade, eliminating idle capital. This enables >10,000% APY for specific blocks. This matters for MEV searchers and arbitrageurs maximizing yield on volatile, high-volume opportunities.

Competitive bidding for order flow: LPs compete to fill the entire trade at the best price, often beating the pool's quoted price. This matters for large traders and DAO treasuries executing multi-million dollar swaps where price impact is a primary cost.

Constant bonding curves: Liquidity is always present, providing deterministic price impact for any trade size based on the pool's reserves. This matters for retail users, DApps, and payment systems requiring reliable, always-available execution without relying on LP competition.

Sustainable fee generation: Protocols like Uniswap V3 and Curve earn consistent fees from locked TVL, funding development and governance. Pools act as composable money legos for lending (Aave), derivatives (Synthetix), and yield strategies. This matters for protocol sustainability and DeFi ecosystem building.

• MEV-Capturing Strategies: Sandwich bots and arbitrage on Uniswap V3.
• Large, One-Off Trades: DAO treasury rebalancing or NFT sale proceeds.
• Ephemeral Market Making: Providing liquidity for a specific, anticipated event.

• Always-On DEXs & Wallets: User-facing apps needing 24/7 liquidity.
• Stablecoin & Correlated Asset Pools: Where low, predictable slippage is critical (e.g., Curve, Balancer).
• Building Composable Yield or Lending Products: Using pool LP tokens as collateral.

Dynamically allocates capital only during a trade: Enables massive single-trade depth (e.g., $10M+ swaps on Uniswap v3) without requiring permanent TVL. This matters for arbitrageurs and large traders who need to execute with minimal slippage on-demand, not continuously.

Eliminates impermanent loss exposure: JIT providers (like sophisticated MEV bots) hold assets for seconds, not months. This matters for capital-sensitive entities (e.g., hedge funds, market makers) who want fee revenue without the long-term volatility risk of AMM positions.

Guarantees 24/7 availability: Provides a constant baseline for swaps, essential for retail users, DApps, and oracles (like Chainlink) that require reliable on-chain price feeds. Protocols like Curve and Balancer rely on this for stable asset trading.

Enables long-term tokenomics and governance: Staking rewards, veToken models (Curve, Balancer), and liquidity mining programs require locked, persistent TVL. This matters for protocol treasuries and DAOs building sustainable ecosystems and aligning LPs with long-term success.

Introduces MEV centralization and fragility: Dominated by a few sophisticated searchers/bots, creating a potential single point of failure. No fallback liquidity if bots withdraw. This is a critical risk for protocols needing censorship-resistant, reliable liquidity.

Inefficient capital lock-up and high opportunity cost: Majority of TVL sits idle during low-volume periods. LPs bear significant impermanent loss risk for modest fee yields. This is a major hurdle for attracting large-scale institutional capital to DeFi.

Maximizes Capital Efficiency: LPs deploy capital only for the duration of a single block, avoiding idle funds. This matters for high-frequency strategies on Uniswap V3 where capital can be rotated across multiple pools. Reduces Impermanent Loss Risk: Exposure is limited to seconds, not days or weeks. This matters for sophisticated market makers providing liquidity for large, predictable trades on Ethereum mainnet.

Requires Sophisticated Infrastructure: Demands high-speed bots, mempool access, and MEV strategies. This matters for teams without dedicated MEV engineering resources. Creates Slippage for Others: Front-runs retail swaps, worsening execution. This matters for protocols like CowSwap that aim for fair, MEV-protected trades.

Ensures Predictable Execution: Liquidity is always available, providing stable slippage curves. This matters for user-facing DEXs like PancakeSwap and lending protocols like Aave that require constant collateral liquidity. Simplifies Protocol Design: No need for complex block-building logic. This matters for new L1/L2 chains (e.g., Base, Arbitrum) bootstrapping their core DeFi ecosystem.

Lower Capital Efficiency: Funds are locked and exposed to risk even during low-volume periods. This matters for LPs comparing ROI against JIT or yield farming alternatives. Vulnerable to Impermanent Loss: Long-term exposure to asset volatility can erode principal. This matters for stablecoin pairs or correlated assets on Curve Finance pools.