Constant Product MM (CPMM)

Umbra’s Constant Product MM is built on the design principles of Raydium Constant Product Pool, operating as an immutable, permissionless, and decentralized platform where liquidity is entirely controlled by the users who provide it.

Raydium introduced a liquidity pool model based on the constant-product formula, represented as:

x(token1) ∗ y(token2) = k

This formula ensures continuous liquidity for pooled assets at all price points, regardless of market size or volatility, even during sudden price swings.

By leveraging this model, liquidity providers are not required to actively manage bids or asks. Instead, trades are executed directly against the liquidity pool, providing efficient, low-latency swaps without relying on an order book-based counterparty, aligning with Umbra’s goal of delivering deep, composable liquidity within the Eclipse ecosystem.

Low Barrier to Entry for Liquidity Providers

Raydium’s Constant Product MM model ensures a low barrier to entry for users looking to create or provide liquidity to a pool, as long as they hold the required assets.

Liquidity providers (LPs) can seamlessly deposit tokens of equal value into an Umbra liquidity pool, receiving a fungible LP token that represents their proportional share of the pool’s holdings.

These LP tokens accrue value over time by earning 100% of trading fee allocated to $veUMBRA holder who vote on the LP pair. However, liquidity providers should be aware of impermanent loss, which may occur if one asset in the pool diverges significantly from its original price at the time of deposit.

Liquidity for Diverse Asset Pairs

Umbra’s AMM design is built for SVM-native fungible assets, ensuring seamless integration within the Eclipse ecosystem. Unlike Ethereum-based AMMs that rely on non-rebasing ERC-20 tokens, Umbra leverages SPL compatibility, similar to Raydium on Solana, allowing for efficient liquidity management and high-speed execution.

This enables the permissionless creation of unique trading pairs such as ETH-ECLIPSE that might not exist on centralized exchanges. By supporting a broader range of liquidity pools, Umbra enhances capital efficiency and maximizes fee capture within Eclipse. Additionally, users can optimize their exposure dynamically through yield-generating LP positions, rather than simply holding assets passively. With SVM’s parallel transaction processing, Umbra ensures low-latency swaps and deeper liquidity, making it a premier trading hub for Eclipse-native assets.

Automated Fee Mechanism

To fairly compensate liquidity providers will earn $UMBRA emission for providing liquidity, which could be locked as $veUMBRA to earn generated fee.

Incentives and Fees

Users who provide liquidity to Umbra pools receive multiple rewards and incentives, including:

• Eclipse Points – Earned through liquidity provisioning and ecosystem participation.

• Umbra Points – Accrued from staking LP tokens and participating in governance.

• Dual Reward Pools – Some pools may offer additional incentives from Umbra's partner projects.

In summary, liquidity providers earn Umbra Points and Eclipse Points from Umbra and its partner protocols, creating one of the most competitive incentive structures in the Eclipse ecosystem.

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For more references about Umbra Constant Product AMM, we recommend visiting the original Raydium Constant Product Pool documentation and visiting the multiple DeFi-centric resources online that reference Raydium.