LP Finance TWAMM, Another Big Step for Solana Liquidity

LP Finance
4 min readMay 21, 2023


LP Finance is introducing our new core product, TWAMM (Time-weighted Average Market Maker). What is TWAMM and why is the team confidently mentioning it as “Another Big Step” for Solana DeFi? Let’s find out

Current State of Solana Liquidity

Let’s take a look at the current state of Solana liquidity before diving into TWAMM.

After the FTX drama, Solana’s liquidity experienced a serious downfall, which made most tokens on Solana illiquid. We should admit that the rich liquidity previously came mostly from excessive liquidity mining, not organic market making fees. In a short-term, project tokens might be highly liquid, but it drives inflation of the token which might cause a death spiral of market liquidity (which occured.

Organic price discovery happens through orderbooks, as orderbook liquidity, depth, and spread is rebalanced frequently to ensure that market makers are not losing money. On the other hand, AMM (CPMM or CLAMM) liquidity miss outs on dynamic depth and spread, which might cause LPs to be an “exit liquidity” for other traders.

LP Finance believes that as DeFi matures, orderbook utilization would increase as it represents the nature of price discovery and market. This on the other hand, means that DeFi liquidity would be “dynamic” and highly correlated to market conditions.

For a simple explanation, in a bull market, it is likely for liquidity depth to increase and spread to be tighter. However in a bear market, it is healthy for market makers to keep the liquidity depth shallow and widen the spread.

So What is TWAMM?

Leaving the long explanation behind, TWAMM (Time-weighted Average Market Maker) is a protocol that allows traders to effeciently execute orders over a specified time period (TWAP orders).

TWAMM utilizes an underlying AMM to settle trades, but LP Finance utilizes Jupiter Aggregator to settle trades. This is to remove the unnecessary hassle of attracting liquidity to our AMM.

A simple step on how TWAMM works is as follows.

  1. User submits 10,000 SOL buy order over 4 days
  2. If there is a counterparty (x SOL sell order over 4 days), the order is matched
  3. Market makers can settle the order at oracle price for arbitrage opportunities (Sell x SOL to User’s position at oracle price and buy back x + α SOL on market)
  4. Crank settles order by executing swap order on Jupiter Aggregator

After submitting the order, the steps above (2,3,4) are executed continuously every seconds until the order is complete.

TWAMM allows permissionless TWAP order execution on Solana without custodians as well as allows the trade to be as close as possible to the TWAP price.

Why TWAMM is Crucial for Solana DeFi

TWAMM plays a huge role for different parties on Solana. Here are core-use cases for TWAMM.

Liquidity-relative Whales (Less-liquid tokens)

The term “liquidity-relative whales” defines users that has large holdings of token relative to the market liquidity. Even if a user holds $1k of token X (which is not a huge amount), user is considered a “liquidity-relative whale” if the market liquidity is $1k. If the user attempts to exit, the user won’t be able to receive $1k in return as the token X is illiquid.

This mostly happens for following tokens

  • Bridged Tokens
  • Ecosystem Tokens + Meme Tokens

Users can execute TWAP orders via TWAMM to reduce market impact of the trade and get a better average price of the trade.

Ecosystem Tokens

Ecosystem protocols gain a huge benefit by having their tokens on TWAMM. It is usually inefficient for a team to provide huge amount of liquidity on AMMs. By utilizing TWAMM, traders can trade under low-liquidity conditions without worrying about huge price impacts.

Additionally, TWAMM can bring organic and capital efficient yield to AMM LPs, which would attract more liquidity to the pool.

DAO Governance

As DAOs mature, treasury management would be fully decentralized which is opposed to the team having an “actual control” over funds. Once this happens, DAOs would propose for trades on AMM to manage treasury.

Let’s imagine X DAO proposing to swap 1M USDC to ETH. This proposal would be executed once the vote has passed. It is pretty certain that other traders would front run this trade prior to execution as it is public.

Now, let’s imagine X DAO proposing to swap 1M USDC to ETH over 4 days via TWAMM. As the trade is executed in small pieces, traders won’t be able to front run this trade for a mass profit as the price impact is minimal.

TWAMM is not a special “feature” for governance, but it is a core component for it.

How to use TWAMM?

Using TWAMM to place TWAP order is simple. UI is hosted to twap.so and twap.lp.finance.

  1. Select token, amount, execution period and click “Place Order”.

2. Click “Orders” to check order status.

3. Click “Withdraw Liquidity” once trade is complete.

Got Questions?

This is a wrap of intro to TWAMM! If you are interested or have any questions, reach out on our socials :)

Twitter: https://twitter.com/LPFinance_

Discord: https://discord.gg/vGZyEBvGTH

Telegram: https://t.me/LP_Defi_Official_group

Email: contact@lp.finance