From x*y=k to Ticks: Seeing Concentrated Liquidity on Uniswap v4 in Real Time

Transcript

Hello everyone. Nice to see you all here today. My name is John John and I'm from NVO and we we're going to be seeing concentrated liquidity. You're already seeing it right now, but I want a quick hands up anyone lost some money being in an LP in Uniswap over here? Yeah, looks like there's a few of us. This talk for us. Don't worry guys, we got you. We're going to see why you did it. Um and beyond just looking at concentrated liquidity, we're going to look at different kinds of pools all overlaid. We're going to be comparing constant product AMM to what it looks like with concentrated liquidity.

Really, there's going to be so many bar charts. My wife started calling me bar chart boy after making this. So, you're in for a real treat. Uh but if we have to really take a step back and look at why do we even need liquidity? What's the whole point of it? Well, it's the the swap, right? I guess most of you have made a swap. You can't swap something from A into B without someone being the liquidity provider. You can see over here. This is Uniswap V4. This is called v4.xyz.

And we have hundreds of swaps happening in real time. Different chains, different assets and behind every good swap there is a good liquidity pool, right? People don't just do it for the love of giving liquidity. There has to be some kind of mechanism and design around having this liquidity so that people will be able to swap between things, right? And and there's been a lot of thought and research that has gone on into it. But there hey, maybe hasn't been as much well, let's visualize exactly what it looks like on chain. Is it working? How is it going? So, that's something today hopefully we're going to dive into and

you're going to get a bit of an idea and a bit more of a visual into what things actually look like. Without further ado, so we got these lovely musical bars playing around here. We have this price line rapidly shifting. This is the last 30 days of the Ethereum USDC pool.

And there's quite a lot going on here. We're going to get into it. But what you're really seeing is concentrated liquidity in action. The That's it's kind of in the name, right? Concentrated liquidity. You're seeing most of it concentrated around the price there. Now, to go through one or two concepts just so we're all on the same page. One of the big things is is ticks, which allows you to choose where you put the price. And to drive that point home, we've created a little game tick jumper. Uh there's little green guy. This is the tick. He's got to run and he's got to jump over all the liquidity bars and and get to the finish line.

You'll see he's he's doing just fine. 9.76 seconds. Probably as long as it normally takes me to lose money trading any perps. Um ticks, they are these discrete price intervals and that's really one of the the big innovations. Liquidity providers choose the range where they put their capital as opposed to the older paradigm where liquidity was just spread across everywhere. The entire price range, right?

We're going to go into another one. This is now Arbitrum. The ETH USDC pool on Arbitrum. What do you What do you notice here? Right? You're probably noticing Yeah, I'm seeing there's quite a lot of flat bits. It it's it's quite spread out, but we're seeing like these little jumps that are following the price. Right? And there's there's quite a lot of dark arts going on in concentrated liquidity and I I certainly don't know everything there is to know about them, but it's interesting to see it in action. There's a lot of things like just-in-time liquidity where people are

literally seeing a big swap that's going to happen. They're putting a whole lot of capital in, supplying it. The swap's happening using their capital and then they're taking the capital back out immediately afterwards. There's There's all of these things going on that are happening and you start to see these patterns emerge over time when you take a look at these ticks. Now, just to to cap it off with some good old bullet points so we're all on the same page, right? The big innovation here is really capital efficiency, which we're going to drive home. But that means because the capital's not spread everywhere in the whole range, it's

spread at a specific point, there's a lot deeper liquidity there, which facilitates better trading. And I think this next This might This might just be my favorite slide. And it kind of drives home and shows that difference for all of you. So, on the left, we have constant product AMM. The same liquidity on both sides, but on the left it's spread evenly across the entire price range, right?

On the right, LPs are choosing where they want their liquidity to be. And you can see the choice is mostly there around the price, right? And the resulting factor is by the price there, there's a much greater amount of liquidity, more capital efficiency, better trading experience, more liquidity to trade and swap with, right? So, I really like taking a look at the two different ones over there. Now, next little visual over here just to to show I thought it would be

interesting. Um This is if you accumulate all of that liquidity across all the tick ranges and look at um Ethereum USDC what looks like there. You can see quite a a gloomy picture of a a lot of a lot of ETH sitting in there, not so much USDC. But coming back to some more questions I had, which I think you might have too, which are are really interesting is there's not just one pool.

There's many pools on different chains trading the same assets, but they have different liquidity profiles. You know, how how might they differ between different chains? And this was the the start of that question. It's It's me saying, "Okay, in real time, we are going to plot these prices and these trades and these swaps across Ethereum, Arbitrum, Uni chain base and and let's see how different they are and what they look like. And you you can go see this now live on v4.xyz and all of the the GitHub stuff is there, too. I'm I'm really hoping some people here are going to clone some repositories after this and play around

with building their their own stuff. But this starts to get on to visualizing liquidity across multiple pools. So, we're going to get that in a second, but before we do that, uh I I really a big goal here today would be to hopefully have a lot of people here going out and building their own interesting visualizations of things that are going on on chain, right? There's so much going on and people aren't just doing enough to actually go and show what's happening. And and it is a it's a fun data problem. It can be a very hard data problem. As you know, hundreds of millions of blocks, billions

of events, many chains. It's It's not so easy, but hopefully it can be easier for you. And as I said, I've got some GitHub repos to to get you started, but you can use NVO and you can see right here. It's something that you can run to to very quickly across a big number of chains, extract a large amount of data for for whatever you want to build. Real-time analytics, front end. Uh you can see in 20 20-30 seconds, that's 350,000 events like no one's business. Really allowing you to build at scale and build these kind of visualizations. So again, hoping you take the time to go clone and and run some of this yourself. It's

really really easy to get started. And now, we're going to head back into the land of multiple pools of the same asset and what that looks like. Now, the reason again we see multiple pools is they have different configurations, right? Different uh fee tiers, different tick spacing. And maybe what's unsurprising in this diagram is you can see the biggest pool by TVL, the ETH USDC one, got the highest fee

tier. You know, perhaps the LPs, most of the money's there because they're earning the most on the swaps, right? Just little hypothesis for you over there. Next, I think I wanted to take it one step further, not just look on one chain, but let's now look on different chains, right? Arbitrum, UniChain, Ethereum, and let's take a look at how the liquidity tracks over the last 30 days. You'll probably start to notice, you can

probably just make it out over there in my poorly chosen color scheme, a couple of dancing little bars. Things like Arbitrum where the block time's really, really short, we're seeing lots of little spikes, lots of active liquidity management where people are moving stuff around. We're seeing less of that in other bigger networks where maybe that's not a efficient strategy in order to get the the biggest amount of fees. But really the the order book varies quite wildly, and it's interesting to take a look at the global on-chain liquidity and see across all

pools, you know, what it might look like. I mean, for example, there's that that one pool we see that's just got this this massive spike of liquidity up at the What is that? Two and a half thousand dollar price range. I I don't know who the LPs are, what the story was behind there, but very fascinating to to peel back all of these pools and try and understand why people might be doing these things, how are they doing them, and many of you might know better than me why they are doing them. So, it would be interesting to chat to you about that afterwards. Also, if you chat to me afterwards, you you're in line to receive one of these premium merch NVO caps in a few different colors. Uh one of

them also says technical, one says dev, so they they're quite nice uh primo merch caps. Uh come over chat if you have any ideas. Uh I I then I thought, well, let's let's have a little bit of a bonus round. Let's look at other kinds of on-chain data that are interesting right now, and normally particularly hard to get a hold of and and visualize. And this over here is a first one which I I really like cuz it it visualizes the price of a market over time, but not just that, it also visualizes volume over time in the form of a heat map. And this is if Liverpool was going to win

the Premier League, and you can see from September to April how it just kind of climbed, there was more and more hope, and it was it was just climbing up. And but what's really nice about this, you see in the beginning of the heat map, there's there's not actually much volume, there's not much going on, but that just starts to get red hot towards the end. And and that's at least the trend I'm starting to see on these types of markets. A lot of the actual action is happening at those hot spots right towards the the end, right? Another interesting one is around the election. Again, you can just see masses of volume, those real hot spots are happening right towards the end, especially up towards where it's

basically like fully resolved, bang, people are spending lots, lots in those points. So, this is another really interesting one to to visualize. And if you have tried to visualize it, there's billions of these these order full events. And it's not always easy to quickly scrape them and get them, but something cool that's in alpha that we've just dropped is indexing data directly into ClickHouse as a as a sync. So, go check that out. In this case, billions of events in there at query time, able to build this entire graph 200, 300 milliseconds every single market that exists. And there's a

lot more where this came from. So, if you want to build something cool, we'd again love to see it. There's so much stuff to visualize that that just isn't being visualized yet on chain. Uh finally, I've got something else that's that's pretty interesting. Often, you just want to see at a glance, you know, how how fast is a is a contract moving? What what's actually being emitted from this contract at a glance? And and this is this is a this is insane. It's running in your terminal, but super quick, and it's running at a rate of 500,000 events per second, and it gives you a quick kind of overview of this contract. This is the Uniswap contract. How many swaps? How many burns? How many mints? What's going on?

It gives you a nice distribution, and it's it's a nice starting point when you want to figure out of a contract, you know, what what exact data is coming from it, and what tools do I need to to maybe go ahead and visualize it further. So, also go ahead and play around with that. Um there's stable coins which which we could chat about for hours, which I won't go into, but there's right now so much interesting stuff to look at around stable coins. Different stable coins, different chains, real time, where the money's going. There's so many insights currently left on the table. I'd love to see more things around that, especially in real time. So, this is something very basic showing all

of those transfers in real time, and it's it's it's a staggering amount. So, we'd love to see some more research from people here into that. Another super quick one. Uh this is this is the last little example, but same thing with with Safe. This is SafeScan, it's live, it's like Etherscan, but again, built to show what's happening in the whole ecosystem of Safes. You want to check out uh different Safes, understand how the ecosystem is looking. So, yeah, really, there's a there's a bunch going on there. And if if you guys do anything today, make sure you you go to head get up, you you clone some of these repos, and you start building some of your own data pipelines, understanding what's going on chain.

It's one of one of the coolest places I think to get get started, understand the landscape, and and build cool stuff. It's it's really right now an underrepresented area. There's not enough uh cool cool visualizations of what's actually going on on these blockchains. Cool. So, that's just about it. I think we might even have time for a question. Uh my name's Jon Jon. Uh if you want to get started on any of this, visit nvo.dev. You can also get all of that Uniswap information. You can run it locally. Every single one of those billion events, uh go to v4.xyz, and you can uh run it. And yeah, you got

a question, go for it. So, the question is, did I analyze the utilization of the liquidity in the asset pools? No, I didn't. This was just a visualization around that. I I know you're giving a talk on that later today, so I guess that's a future request from 1inch Nice. Okay. So, there's a request from 1inch, and I think we can get on that, making a a dashboard around utilization. I actually think that's a fantastic idea. And I I I certainly don't know enough about uh absolutely everything in concentrated liquidity. So, yeah, that would be a very cool one to make a dashboard of and and get it up. Um again, you can you can check me on

Twitter, Telegram. You can come talk to me afterwards and get a cap. If I can recommend doing something in Can, go have a swim in the ocean. You always feel better after a swim. No one ever didn't enjoy a swim. So, also go out uh and enjoy that. And yeah, appreciate your time, appreciate you listening, and we'll see you for a free cap afterwards. Thanks everyone.