Liquidity

Anyone can become a liquidity provider in Exponent yield markets, earning trading fees alongside exposure to both fixed and variable yields until a market’s maturity.

Liquidity providers can simply provide the underlying asset of a yield market (e.g. JitoSOL) and earn extra yield on it, while Exponent’s Liquidity Vaults acquire the assets required for the AMM pool.

Yield Market AMM Pool Composition and Mechanics

Since Exponent yield assets have an intrinsic time factor in their value and don’t behave like traditional volatile crypto assets (e.g. SOL) as they mature, providing liquidity for them in a classic AMM would encounter many inefficiencies such as significant impermanent loss at maturity.

Exponent has built a Time-Dynamic AMM inspired by Pendle’s AMM design, which is optimized for assets with maturities and dynamically concentrate liquidity as they approach maturity for optimal price execution.

Beyond powering Exponent yield markets, Liquidity Vaults can also serve as issuance points for yield market assets, using the liquidity from providers to mint PT and YT tokens and compose the AMM pools.

How does supplying liquidity into Exponent AMM work

To offer an optimal experience for both traders and liquidity providers, Exponent’s AMM pools have been designed with:

To achieve this, an Exponent yield market AMM pool is paired with the market’s underlying (e.g. JitoSOL) and its fixed-term asset (e.g. PT-JitoSOL, minted from JitoSOL).

Both tokens grow in value over time while their price divergence remains relatively stable prior to maturity due to their shared underlying asset and high price correlation. This design helps liquidity providers avoid significant impermanent loss from price divergence.

Additionally, to ensure optimal liquidity concentration of the assets in the pool, Exponent’s AMM features a time-dynamic liquidity curve, which:

• concentrate liquidity around the expected yield range of a specific market as assets approach maturity,

• and account for yield accrued over time.

This approach offers passive liquidity provision, sparing providers from manually adjusting their positions and enhancing capital efficiency for yield trading to capture the most fees — since the AMM’s time-sensitive component handles this.

Which Mode to Use When Providing Liquidity

Because Exponent is the main issuer for its yield markets—unlike other AMMs where acquiring tokens is the only way to supply liquidity—liquidity providers on Exponent can also mint them to offset any price impact.

Consequently, there are two ways to supply liquidity:

When to use Swap & Supply

• If you want exposure to only one position (LP tokens) and want to avoid managing YT.

• If you expect the current underlying APY to slightly underperform.

When to use Mint & Supply

• If you want to retain higher underlying yield and points exposure through YT minted and are neutral on the underlying APY.

• If you plan to withdraw before maturity, PT and YT minted can be recombined for the underlying asset at no cost.