TL;DR Arrakis Pro is a bespoke solution that helps token issuers optimize their onchain liquidity management. Arrakis Pro leverages four core liquidity strategies: Bootstrap, Flagship, Treasury Diversification, and Customized. In this guide, we detail how they work.

Arrakis Pro is the first fully onchain market maker for token issuers. As the onchain liquidity landscape complexifies, our offering helps teams navigate it efficiently. Arrakis Pro has become known as DeFi’s go-to liquidity management solution, trusted by industry leaders such as ether.fi, Euler, Maple, Stargate, and more.

Arrakis Pro recently went multi-DEX, giving teams greater flexibility in the way they manage their liquidity onchain. Teams can easily port their liquidity between modules onto their preferred DEX and chain. Arrakis Pro currently supports modules on four different liquidity solutions:

• Uniswap V4

• Aerodrome

• Velodrome

• PancakeSwap Infinity

These solutions let token issuers automatically manage their liquidity in concentrated ranges and Arrakis Pro applies four strategy templates across each of them. They are as follows:

Bootstrap - a strategy focused on helping teams accumulate the quote token (i.e. ETH or USDC) by deploying liquidity in narrow ranges holding the base token (i.e. the project token, e.g. EUL) only. The strategy is usually deployed soon after the TGE, bootstrapping liquidity continuously to bring the inventory balance to 50:50 and enable price discovery. It allows projects to bootstrap deep onchain liquidity without the need to provide ETH or USDC from their own treasury.

Flagship - usually applied after the Boostrap strategy, this strategy focuses on helping token issuers create the deepest possible onchain markets while preserving their inventory, taking into account variables such as price movements, inventory balance, and market volatility. The strategy uses three risk modes, making positions narrower during calmer markets and wider during volatile markets to optimize capital efficiency and minimize risk. 

Treasury Diversification - a strategy focused on helping teams with a token diversify their treasury. The strategy uses single-sided LPing to create limit orders and swaps the project token for USDC or ETH when it falls into the predefined price range. 

Customized - a strategy that allows token issuers to work with Arrakis on a solution that has custom rebalancing logic (e.g. optimizing for yield-bearing stablecoins that have a native deposit and redemption mechanism). The Customized approach suits teams that want more flexibility with their liquidity strategy and benefit from more complex onchain actions.  

Arrakis Pro uses these strategies to ensure projects achieve optimal liquidity conditions with minimal price impact while optimizing their returns and fees earned for their entire token lifecycle. We explain how each one works below.

Bootstrap strategy

Optimized for:

• Teams looking to leverage concentrated liquidity to acquire quote assets (i.e. ETH or USDC). 

• Teams that are preparing to TGE and have limited quote assets from their own treasury for market making. 

• Teams that want to enable price discovery for their token at TGE. 

• Teams new to onchain liquidity with limited quote assets to be used in market making.  

The Bootstrap strategy leverages concentrated liquidity to accumulate the quote asset (i.e. ETH or USDC) when the pool is more heavily weighted towards the base asset (i.e. the project token). This is why it suits teams with limited capital to deploy as their Project Owned Liquidity. The goal is to rebalance the ratio closer to 50:50 without adversely impacting the token’s price. 

The strategy aims to enable price discovery following the TGE by placing liquidity in a wider, less concentrated range. When the ratio is 50:50, the price can more easily move in both directions with minimal impact. With the Bootstrap strategy, the token does not require significant buying pressure for the price to rise, and there is no sell pressure wall that prevents the price from rising.

Teams can provide liquidity with a heavy weighting towards their own token, though we usually recommend they provide their token and quote asset in at least an 80:20 ratio. The more of the quote asset they can supply, the better.

Liquidity Distribution

The strategy distributes liquidity into the following range positions: 

• Full Range - a full range position that includes most of the team’s quote asset reserves. The position’s ratio is close to 50:50.

• Bootstrapping Range - short, sequential ranges that gradually increase in size. Each position holds the project token only, with the goal of capturing the quote asset while minimizing price impact during upside movements.

• Price Discovery Range - a long-range position containing the project token only that goes up to the maxTickPrice. The goal is to capture additional upside if the token enters price discovery.

Setting bootstrapping positions helps token issuers accumulate the quote asset as their token gets bought. The strategy asymmetrically absorbs volatility as buying pressure increases, bringing the ratio closer to 50:50.

The strategy sets target prices to the right of the current price where rebalances will be triggered. As the project token gets bought, the target price captures the quote token as it gets sold into the pool because range positions are set between the two prices.

The inventory before bootstrapping

When the pool rebalances, liquidity in the Full Range increases, and the current price moves to the right. 

We continuously bootstrap liquidity by reopening range positions at the new price. Liquidity in the Full Range increases and the Bootstrapping Ranges get calculated based on the Full Range. In the Price Discovery range, liquidity decreases. 

The goal is for liquidity to gradually move into the Full Range until the ratio is 50:50, at which point bootstrapping is complete and we can migrate to the Flagship strategy. The diagram below shows how the pool looks when bootstrapping is almost complete and the ratio is 45:55.

The inventory when bootstrapping is almost complete

Flagship strategy

Optimized for: 

• Teams that want to focus on maximizing their capital efficiency. 

• Teams that have enough ETH or stablecoins to create adequate market depths.

• Teams that have already bootstrapped liquidity with Arrakis Pro’s Bootstrap strategy. 

The Flagship strategy is designed to dynamically adjust liquidity positions based on price, inventory, and volatility triggers. A rebalance gets triggered when one of the values moves beyond a predefined range. 

Capital gets allocated based on imbalances in the inventory and volatility. The range’s width has a nonlinear dependence from the inventory balance. With this strategy, the range gets wider as the inventory becomes more imbalanced. This allows us to protect capital in riskier market environments and maximize capital efficiency as volatility decreases. 

The strategy aims to maximize depths around the spot price during calm markets (by making positions narrower) and minimize inventory risk and IL during volatile periods (by making positions wider). It also implements security measures to protect teams from MEV extraction. 

Risk Modes

The strategy runs one of three risk modes based on the volatility: 

• Low volatility - almost all of the liquidity gets deployed in this threshold. 

• Moderate volatility - most of the liquidity gets deployed in this threshold to reduce risk. 

• High volatility - a portion of the liquidity gets deployed in this threshold and the aim is to reduce IL and inventory risk. 

As the market sees prolonged periods of low volatility, we anticipate that most of the liquidity should be deployed most of the time. In occasional periods of extreme market activity, only a portion of the liquidity will be deployed. 

Liquidity Distribution 

The strategy distributes liquidity into three ranges: the Foundation Range, Stability Range, and Depth Range. 

The diagram below shows how liquidity is distributed during a period of low volatility when the ratio between the quote asset and project token is 40:60. 

Rebalance Triggers

The strategy adjusts liquidity based on three triggers: 

Price Triggers - when the price moves beyond predefined ranges in either direction, liquidity gets redistributed around the new price. 

Inventory Triggers - when the ratio between the quote and base asset changes by more than a set value, the liquidity gets redistributed. For example, a rebalancing may occur when the ratio moves from 59:41 to 60:40. 

Volatility Triggers - the strategy selects the risk mode based on key metrics like the mean hourly volume and standard deviation of hourly volume. The amount of liquidity deployed changes as the risk mode changes.

Treasury Diversification strategy

Optimized for: 

• Teams that have already conducted their TGE. 

• Teams that hold a large portion (>70%) of their treasury in their governance token.

• Teams that want to passively accumulate ETH or stablecoins without having to closely monitor the pool. 

The Treasury Diversification strategy aims to help token issuers diversify their treasury by swapping their project token for ETH or stablecoins at predefined price points. Unlike the Bootstrap strategy, it’s designed for teams that have a token and want to diversify without making a large price impact by taking liquidity out of the market - this strategy is not for acquiring initial liquidity at the token launch.

The strategy leverages concentrated liquidity with single-sided LPing to deploy liquidity in a specified price range below the token’s current market price. In doing so, it effectively creates a buy wall for the token, wherein the token has visible price support at predetermined levels.

Aside from creating an effective “floor price” for the token, the strategy is useful for teams that want to accumulate ETH or stablecoins while minimizing price impact. The strategy allows teams to do this passively at predictable levels they specified without monitoring the pool or market selling.

The Treasury Diversification strategy is similar to the Bootstrap strategy in that it suits teams that need to accumulate USDC or ETH. However, in this case the focus is on treasury diversification after the token launch rather than bootstrapping liquidity for the launch.

Customized strategy

Optimized for: 

• Teams that want extra flexibility in their liquidity strategy.

• Teams that have a specific liquidity goal besides bootstrapping and minimizing price impact (i.e. improved PnL).

• Teams that are more likely to adjust their strategy at a greater frequency based on market conditions or other factors.

• Teams that have a deep understanding of concentrated liquidity.

Our Bootstrap and Treasury Diversification strategies are specifically designed for projects that need to acquire ETH or USDC. The Flagship strategy, meanwhile, accommodates post-TGE projects once they have acquired sell side liquidity. But for many teams, a tailored approach is preferable.

The Customized strategy caters to these teams. With this approach, teams work with Arrakis on a solution tailored to their exact needs and liquidity goals. For example, they can use custom rebalancing logic via the Arrakis Pro Hook on UniV4 or use one of either the Bootstrap and Flagship strategies with their own adjusted parameters. While our other strategies are effective for many different projects, this one is most suitable for teams that seek more adaptability in how they manage their liquidity. 

Choose the Strategy for Your Liquidity Needs 

Whether you’re a nascent project preparing for your TGE, you want to diversify your treasury, you want to improve capital efficiency for your token’s pool on the most cutting-edge liquidity solutions, or you want us to help you develop your own tailored strategy, Arrakis Pro is here to cater to your needs. To learn more, check out our docs or fill out our contact form and we’ll get in touch to discuss how we can help you achieve your liquidity goals.