Single Asset LP

What’s that new button?

You may have noticed that a new feature was added to Osmosis on December 17: the Single Asset LP checkbox! You may be asking yourself, how does this work?

You’ll notice that upon clicking the checkbox, the Manage Liquidity UI changes to only display one asset of the pool, with a drop down menu to select between them. Also, “Price impact” is now displayed.

TL;DR — The Single Asset LP feature is a convenience option that essentially converts your tokens to the correct pool weight, then adds them to the pool in one transaction. Swap fees will apply, and the pool ratio will be affected by the swap. Since the tokens were already swapped, when you remove liquidity you’ll receive equivalent amounts of each pooled token in proportion to the pool weight.

This new Single Asset LP feature takes advantage of the Join Swap Extern Amount In transaction, which was present in Osmosis since launch, though not accessible through the UI until now. It allows you to add liquidity to a pool without swapping to the appropriate pool weight first (while most pools currently on Osmosis are dual asset pools weighted 50–50, the protocol supports multiple asset pools and custom pool weights). This transaction will first swap the tokens to the correct weight, so a swap fee will be assessed, proportional to the tokens that would need to be swapped for a regular pool add.

Osmosis pool transaction types

To add liquidity using the Single Asset LP feature, simply enter the amount of the single asset that you want to pool, keeping in mind that this is the total amount of liquidity that you are adding in this transaction. In addition, pay attention to the price impact. This is an estimation of the effect of the swap on the pool ratio. When swapping one asset to another, the pool ratio changes as more of the swapped asset are added to the pool and some of the received asset are removed from the pool.

So, how does this compare with adding multiple assets to the pool?

• If you have proportional amounts of each asset, you can add them to the pool without affecting the pool ratio
• If you have only one asset, you can swap for an appropriate amount of the other asset(s), then add them to the pool. This will cause a change in the pool ratio, equivalent to the price impact mentioned above
• Alternatively, with only one asset you can use the Single Asset LP feature, which will swap the tokens to the correct weight, incurring a swap fee and affecting the pool ratio

You may notice that the last two options appear to have the same effect. In fact, in theory there is no difference at all between either method. Using the Single Asset LP feature is the same as swapping first to the correct weight then adding to the pool. However, in practice the advantages of the Single Asset LP are: half the transaction fee (which is currently zero), mitigation of the pool ratio changing between when you swap and pool, and the time and effort saved. Remember, if you want to earn Liquidity Mining incentives, you’ll still need to bond after adding liquidity to the pool.

Regardless of the method you use to add liquidity, when you decide to remove liquidity, you’ll receive back an equivalent amount of each of the pooled tokens, in proportion to the pool weight.