Single-Sided LPs vs Two-Sided Quoters

Deposit only one asset: LPs provide liquidity using a single token (e.g., only USDC). This eliminates impermanent loss risk from the paired asset. Ideal for stablecoin-focused protocols like Aave or Compound, where users want to earn yield without exposure to volatile assets.

Lower barrier to entry: Users don't need to source a 50/50 pair. This drives higher TVL for yield-bearing vaults and restaking protocols (e.g., Lido, EigenLayer). Adoption is simpler, leading to faster protocol bootstrap, as seen with $30B+ in LSTs.

Direct market pricing: Quotes are derived from active, two-sided markets (e.g., Uniswap V3, Curve pools). This provides tighter spreads and higher accuracy for large trades. Essential for perpetual DEXs (dYdX, GMX) and on-chain oracles requiring robust price feeds.

Incentivizes professional market makers: Attracts capital from sophisticated actors who manage inventory risk. Creates resilient liquidity that withstands volatile swings. Critical for high-frequency DeFi and institutional trading venues where slippage tolerance is sub-1%.

Specific advantage: Enables liquidity provision with a single asset, eliminating the 50/50 pairing requirement. This matters for long-term holders of a specific token (e.g., ETH, SOL) who want to earn fees without selling half their position. Protocols like Lido (stETH) and Aave (aTokens) exemplify this model.

Specific advantage: Eliminates IL risk from asset-pair divergence, as you are only exposed to one asset's price. This matters for risk-averse institutions or treasury managers who need predictable yield on their native token holdings without market-making risk.

Specific advantage: Concentrates capital into specific price ranges, providing superior capital efficiency for traders. This matters for high-volume DEXs like Uniswap V3 and Curve, where tight pools with $10M+ TVL can offer <0.01% slippage for large swaps.

Specific advantage: Allows LPs to set custom price ranges and fee tiers (e.g., 0.01%, 0.05%, 0.3%, 1%). This matters for sophisticated market makers and DAO treasuries who want to optimize returns around volatile assets or stablecoin pairs by actively managing positions.

Specific risk: Yield is generated via lending, staking, or rehypothecation within the host protocol (e.g., MakerDAO, Compound). This matters if you are evaluating smart contract risk and counterparty risk from integrated protocols, as seen in events like the Euler Finance hack.

Specific risk: Requires monitoring and rebalancing to stay within profitable price ranges. This matters for passive investors, as impermanent loss can easily outearn fee revenue during high volatility, necessitating tools like Gamma Strategies or Arrakis Finance for automation.

Capital Efficiency & Concentrated Ranges: LPs deposit a single asset into a managed vault (e.g., Gamma, Arrakis). This allows for hyper-concentrated positions around the current price, maximizing fee yield per dollar deposited. Ideal for volatile assets where LPs want directional exposure.

Zero Slippage & MEV Resistance: Solvers compete to fill orders off-chain, guaranteeing the quoted price. Users never provide liquidity; they are price takers. This eliminates impermanent loss and is optimal for large, one-off swaps (e.g., treasury management, OTC deals).

Complexity & Active Management: LPs must frequently rebalance concentrated positions to avoid being out-of-range, incurring gas costs. Relies on third-party manager risk. Creates fragmented liquidity that can worsen slippage for swappers if not aggregated properly by protocols like UniswapX.

Liquidity Dependency & Latency: Ultimately relies on the depth of underlying AMMs (Uniswap, Balancer) for settlement. No passive yield for users. For small, routine swaps, the quote-request overhead can be less efficient than a direct AMM swap.