Earn the yield.
Skip the delta.
IL = $0
LP-D absorbed all price exposure. LP-Y holder exits whole.
The structural problem
AMMs price liquidity correctly.
They just don't pay for it correctly.
An LP signs up for fee income. What they actually get is fee income plus a short position on volatility they never agreed to price. Not disclosed. Just a structural consequence of providing liquidity on a constant product curve. The more price moves, the more the AMM routes against them.
Protocols know this math. The standard fix is token emissions: pay LPs enough on top to compensate for what the AMM takes. It works until emissions stop. Then LPs calculate their real P&L and leave. Every major DeFi liquidity crisis follows the same script.
Liquidity provision and price exposure were never supposed to be the same trade.
function afterAddLiquidity(...)
The LP deposits.
The hook handles everything else.
What the LP sends
poolKey (USDC/PRISM, fee, tickSpacing, hook)
tickLower, tickUpper
liquidityDelta
Identical to any standard v4 deposit. No extra steps.
What ends up in the LP wallet
LP-Y token
fee yield, zero delta
LP-D token*
if no standing bid matched
* If a standing bid matched, LP-D was already sold in the same transaction. LP-Y only. IL: $0.
standingBids[poolId]
The protocol pre-funds once.
Every deposit fills atomically.
No per-deposit transactions. No keeper bots. No manual settlement. The bid fills or doesn't, at deposit time, in the same block.
pricePerUnit
IL coverage fraction (0.0 to 1.0). Must cover maxIL to fill.
feeShareBpsLPD
Ongoing fee share earned by LP-D holder per swap.
maxCollateral
Total USDC pre-deposited. Used proportionally across fills.
Demo scenario
$0
IL deducted from the LP.
Price dropped 25%. IL was $412. The vault covered it.
LP deposits $10,000. ETH falls from $2,000 to $1,500, a 25% drop. At exit, the impermanent loss is $412. The hook draws $412 from the LP-D collateral vault. The LP withdraws $10,000 plus all earned fees. Nothing deducted from principal.
Try the demo on Unichain Sepolia →Token structure
Two rational actors.
Different appetites.
The same pool.
LP-Y
Whoever holds LP-Y at the time of exit receives the IL compensation. Not whoever deposited. Whoever holds.
LP-D
Collateral is only drawn on LP exit with adverse price movement. If price holds or reverts, the LP-D holder keeps collateral and keeps earning.
CASE: LP holds both
When the same address holds LP-Y and LP-D, the IL settlement is internal. Net effect is a standard Uniswap position. The split is still on-chain, which lets protocols partition risk accounting without any external counterparty.