Liquidity (LP)

Why You Want to LP on Napier

Providing liquidity on Napier is one of the best choices in DeFi.

One LP, Six Sources of Yield

By providing liquidity to Napier yield markets, you can earn 6 sources of yield:

• PT Fixed Yield: Earned by holding PT.

• Underlying Asset Yield and Rewards: Earned by holding the underlying assets.

• Swap Fees: Derived from PT and YT swaps, with yield automatically compounded.

• Rehypothecation Yield: Earned by deploying idle LP funds.

• Napier Point: See the Napier Point guide for details.

• (Points from partners projects)

Greater Capital Efficiency

• Concentrated Liquidity: Liquidity is allocated within a curator-defined implied APY range, improving capital utilization and increasing LP returns.

• Rehypothecation: When idle, a portion of LP funds is lent to vaults according to the curator’s settings, generating additional yield.

• Unified Pool: PT and YT are traded within a single pool, allowing LPs to earn fees from both swap directions, effectively expanding their fee sources.

Minimal Impermanent Loss (IL)

Napier AMM design ensures that IL is a negligible concern. Napier AMM accounts for PT’s natural price appreciation by shifting the AMM curve to push PT price towards its underlying value as time passes, mitigating time-dependent IL (No IL at maturity).

On top of that, IL from swaps is also mitigated as both assets LP’ed are very highly correlated against one another (e.g. PT-cUSDO / cUSDO). If liquidity is provided until maturity, an LP’s position will be equivalent to fully holding the underlying asset since PT essentially appreciates towards the underlying asset.

In most cases prior to maturity, PT trades within a yield range and does not fluctuate as much as an asset’s spot price. For example, it’s rational to assume that Aave’s USDC lending rate fluctuates between 0%-15% for a reasonable timeframe (and PT accordingly trades within that yield range). This premise ensures a low IL at any given time as PT price will not deviate too far from the time of liquidity provision.

LVR Minimization via Time-Adaptive Curve

In a static curve AMM, the fair PT price rises deterministically as time passes (the discount shrinks), so arbitrage trades are needed to keep up—creating continuous rebalancing costs (LVR).

Napier’s time-adaptive curve internalizes this time decay, reducing the rebalancing costs that would otherwise occur on the path to maturity.

As a result, residual LVR primarily comes from non-deterministic shocks—changes in the market discount rate or PT/YT demand shifts—rather than from the mere passage of time.

Steps to LPing

Earn yield and points by providing liquidity to yield markets:

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Step 1: Select a Market

Make sure you’re on the page of the market where you want to execute your trade.

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Step 2: Open a "Liquidity" tab

When you click the Liquidity button, available actions will appear.

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Step 3: Select an Action

Select the action you perform and follow the corresponding guide below:

Deposit (Mint & LP)

Deposit (Mint & LP)

Provide liquidity without IL by holding a YT component alongside your LP tokens.

1. Your deposit is converted into the required assets

2. A portion of the underlying is minted into PT and YT

3. LP: PTs are paired with the underlying to supply liquidity

4. You retain the LP tokens and the YT in your hand

Tips: When the pool is small, this path helps avoid the price impact you might see with Deposit (Swap & LP).

Deposit (Swap & LP)

Transfer

Migrate

Withdraw (Exit)

Withdraw (Swap & Exit)

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Step 4: Review and Execute

Before executing a transaction, review your rate and costs carefully.

Estimate

• Network cost: Blockchain network fee.

• Fee: Percentage-based protocol charge.

• Pool Share: Your share of the pool’s liquidity

• Implied APY change: Variation in implied APY compared to before the trade.

• Min. Received: The minimum expected amount you’ll receive after a swap or transaction, factoring in slippage.

For more on APY and return calculations, see Calculation.

Setting

Customize the transaction settings to your preferences.

• Max. Slippage: The maximum percentage deviation allowed between the expected and actual execution price during a swap.

  • Auto: Automatically sets slippage tolerance based on market conditions.

  • Custom: Allows you to manually define your preferred slippage tolerance.

• Transaction deadline: The time limit within which the transaction must be completed to avoid failure.

• Aggregators: Currently, Napier supports 1inch as an external swap aggregator. Support for additional aggregators will be expanded in the future.

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Step 5: Check in your portfolio

Where can I view my portfolio?

Check your active positions and rewards in the app’s Portfolio section. It provides a complete view of your balances, accrued yield, and strategy exposure across all Napier markets and integrations.