Umbra
Umbra
  • UMBRA
    • Introduction
  • FEATURES & CONCEPT
    • Overview
  • PRODUCTS
    • Constant Product MM (CPMM)
    • Concentrated Liquidity MM (CLMM)
      • Hybrid Fee Model
    • Trade API
    • Vote Escrowed UMBRA (veUMBRA)
  • UMBRA POINTS
    • Point Program
    • Point Distribution System
  • INFORMATIONAL
    • Audit & Security
    • Contracts
    • Risks
  • FAQ
    • General FAQ
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On this page
  • Understanding Point Allocation
  • AMM vs. CLMM: Key Differences
  • Competitive Structure & Dynamic Rewards
  • Formula for Point Calculation
  • Key Takeaways for Liquidity Providers
  • Getting Started
  1. UMBRA POINTS

Point Distribution System

Understanding Point Allocation

Umbra’s point distribution algorithm is designed to reward efficient liquidity. To grasp this concept, it’s essential to understand how Concentrated Liquidity Market Makers (CLMMs) operate compared to traditional Automated Market Makers (AMMs).

AMM vs. CLMM: Key Differences

In a full-range AMM model, liquidity is spread across the entire price range, ensuring continuous availability but diluting capital efficiency. In contrast, CLMMs allow liquidity to be concentrated around a specific price range, maximizing capital utilization and enabling liquidity providers to earn significantly higher fees.

Competitive Structure & Dynamic Rewards

The Umbra Points Program is designed as a competitive model, ensuring that users strategically optimize their liquidity and trading activities to maximize their rewards. Instead of simple static farming, points are distributed dynamically - favoring efficiency, concentration, and skill, not just capital size.

Fair & Competitive Distribution

  • A fixed number of points is distributed and is shared proportionally among participants based on key metrics like:

    • TVL (Total Value Locked) – More liquidity increases rewards.

    • Liquidity Concentration – Tighter price ranges earn more points.

      • The more concentrated the position (narrower range), the higher its effective liquidity parameter and thus the more points it earns

      • Concentration = 1/(tickUpper - tickLower)

      • For example, if users provide liquidity from tick number 1 to tick number 101, the concentration will be equal to 1/100 or 0.01. Then, this value will be multiplied with time-weighted LP position to arrive at users' LP size

    • Active Duration – The longer your position remains active, the greater your rewards.

  • Users who optimize their positions strategically will earn a larger share of the pool.

  • Each promoted pool has a fixed number of points available for distribution.

This competition-based structure ensures that only the most engaged and efficient LPs are rewarded, making liquidity management a skill-based endeavor.

Formula for Point Calculation

Points are calculated using the formula:

Points = LPValue × Concentration × PositionDuration

Where:

  • PositionValue – The total value of tokens added (higher value = more points)

  • Concentration – The tightness of the price range (higher concentration = more points)

  • PositionDuration – The duration (in seconds) the position remained within the active price range

Key Takeaways for Liquidity Providers

  1. Higher TVL = More Points – The more capital you provide, the more points you earn.

  2. Higher Concentration = More Points – Narrower ranges result in higher point multipliers.

  3. Longer Active Duration = More Points – The longer your position stays in range, the more points it accumulates

  4. Wider Range = More Consistent Points – Full-range positions earn steadily over time but at a lower rate per unit of liquidity

Getting Started

If you're new to concentrated liquidity but want to start earning points immediately, consider opening a full-range position (similar to traditional AMMs) while you familiarize yourself with how CLMMs work. Over time, optimizing your position’s range and size will allow you to maximize point earnings efficiently

Last updated 5 hours ago