Best Practices
This guide provides step-by-step instructions for projects to successfully deploy their tokens and create Concentrated Liquidity Market Maker (CLMM) pools on Sailor, helping avoid common pitfalls that can lead to token price volatility and liquidity issues.
Understanding Sailor's CLMM Architecture
Sailor DEX is built as a fork of Uniswap V3, implementing concentrated liquidity mechanics that allow liquidity providers to focus their capital within specific price ranges. This concentrated approach offers enhanced capital efficiency compared to traditional AMM models, but requires careful planning to avoid common deployment mistakes.
Pre-Deployment Preparation
Token Requirements
Before creating a pool on Sailor, ensure your project meets these essential requirements:
ERC-20 Compliance: Any ERC-20 token can be used to create a CLMM pool on Sailor
Token Contract Verification: Ensure your token contract is properly deployed and verified
Sufficient Token Supply: Have adequate tokens available for initial liquidity provision
Understanding Token Pairing Structure
Each CLMM pool consists of two tokens configured as a base and quote token pair. For example, in a SEI/USDC pool, SEI serves as the base token while USDC functions as the quote token. This pairing structure is crucial for determining pricing mechanics and liquidity distribution.
Step-by-Step Pool Creation Guide
Step 1: Access Sailor's Pool Creation Interface
Navigate to Sailor's pool creation page at https://sailor.finance/clmm/create-pool/1. This interface provides all the necessary tools for configuring and deploying your CLMM pool with appropriate parameters.
Step 2: Configure Token Selection
Important Consideration: To prevent duplicate pools, Sailor allows only one token pair per fee tier. Before proceeding, verify that your desired token pair and fee combination doesn't already exist on the platform.
When selecting tokens for your pool:
Choose your project token as either the base or quote token
Pair with an established token (such as SEI, USDC, or WETH) for better liquidity attraction
Consider the trading dynamics between your chosen token pair
Step 3: Select Appropriate Fee Tier
Sailor offers four distinct fee tiers, each designed for different token categories:
0.01%
Very stable assets
Ideal for stablecoin pairs or highly correlated assets
0.05%
High-volume pairs
Best for established, high-volume trading pairs
0.25%
Most pairs
Suitable for the majority of token pairs
1.00%
Exotic pairs
Designed for volatile or low-volume exotic token pairs
Recommendation: For new project tokens, the 0.25% fee tier typically provides the best balance between attracting liquidity providers and maintaining reasonable trading costs.
Step 4: Determine Starting Price
The starting price represents the number of quote tokens required to purchase one base token2. This initial price setting is critical and should be based on:
Fair market valuation of your token
Comparable projects in your sector
Available capital for liquidity provision
Expected trading volume and market conditions
Critical Warning: Setting an inappropriate starting price can lead to immediate arbitrage opportunities that may drain your initial liquidity.
Price Range Strategy: Avoiding Common Pitfalls
Understanding Price Range Selection
The initial price range determines where your liquidity will be concentrated upon pool creation2. This is where many projects encounter problems by setting ranges too narrow, leading to rapid price movements and potential losses.
Recommended Price Range Strategies
Wide Range Strategy | Recommended for New Projects
Range Width: Set price ranges 50-100% above and below the starting price
Benefits: Provides stability and consistent fee-earning potential
Risk Level: Lower risk of going out of range during market volatility
Capital Efficiency: Moderate, but safer for inexperienced teams
Narrow Range Strategy | Advanced Users Only
Range Width: Set price ranges 10-25% above and below starting price
Benefits: Higher capital efficiency and fee generation
Risk Level: High risk of going out of range, requiring active management
Requirements: Continuous monitoring and rebalancing
Price Range Calculation Guidelines
When determining your price range, consider these factors
Market Volatility: More volatile tokens require wider ranges
Trading Volume Expectations: Higher expected volume may justify narrower ranges
Management Capacity: Narrow ranges require active position management
Risk Tolerance: Conservative approaches favor wider ranges
Liquidity Provision Best Practices
Initial Liquidity Requirements
When adding initial liquidity to your newly created pool
Balanced Approach: Provide equal value of both tokens when price is within your range
Sufficient Depth: Ensure adequate liquidity to prevent excessive slippage on initial trades
Reserve Strategy: Keep additional tokens available for range adjustments if needed
Managing Impermanent Loss Risks
Concentrated liquidity positions face different impermanent loss characteristics compared to traditional AMM pools:
Higher Exposure: Concentrated positions can experience more significant impermanent loss within chosen ranges
Active Management: Regular monitoring and position adjustments become more critical
Strategic Positioning: Careful range selection can help mitigate impermanent loss impact
Farm Creation and Incentive Mechanisms
Exclusive Farm Rights
Only the pool creator can establish a farm for their CLMM pool, providing additional incentive mechanisms. When creating farms:
Dual Reward System: Choose two reward tokens, with one required to relate to the token pair
Reward Allocation: Rewards allocated to farms are final and cannot be withdrawn post-creation
Timing Considerations: Adjustments can only be made 72 hours before the current farming period ends
APR Calculation Factors
The APR calculation for CLMM pools involves complex considerations:
Liquidity distribution around the mid-price
Reward token pricing dynamics
Overall pool liquidity levels
Trading volume and fee generation
Common Mistakes and How to Avoid Them
Price Range Errors
Problem: Setting excessively tight price ranges that result in rapid out-of-range positions.
Solution: Start with wider ranges (±50-100%) and gradually narrow as you gain experience with market dynamics.
Insufficient Initial Liquidity
Problem: Providing inadequate initial liquidity leading to high slippage and poor trading experience.
Solution: Ensure initial liquidity can support reasonable trading volumes without excessive price impact.
Poor Token Pairing Choices
Problem: Pairing with illiquid or inappropriate quote tokens.
Solution: Choose established, liquid tokens as your pair (SEI, USDC, WETH) to attract more liquidity providers and traders.
Lack of Post-Launch Management
Problem: Creating pools without ongoing management and optimization.
Solution: Implement monitoring systems to track pool performance and make necessary adjustments.
Monitoring and Optimization
Key Metrics to Track
After deploying your pool, monitor these critical metrics:
Trading Volume: Daily and weekly trading activity
Liquidity Utilization: How effectively your liquidity range captures trading activity
Fee Generation: Actual fees earned compared to projections
Price Stability: Token price movements and volatility patterns
Adjustment Strategies
Based on performance data, consider these optimization approaches
Range Rebalancing: Adjust price ranges based on trading patterns
Liquidity Additions: Increase liquidity during high-volume periods
Fee Tier Evaluation: Assess whether your chosen fee tier remains optimal
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