Price & Ticks

Understanding how Whirlpool tracks prices using square-root price and ticks

Price & Ticks

Tracking Price

Whirlpool tracks price using square-root price. Each pool supports a sqrt-price range between [2^-64, 2^64].

Tick

Users can deposit liquidity on a custom price range in a Whirlpool. The smallest unit of price measurement (tick) is 1bps. Whirlpool represents the price range as a sequence of ticks and stores accounting information in each initialized tick that hosts liquidity.

Sqrt-price maps to a tick with the formula below. Each tick represents 1 basis point of change from the neighboring tick.

sqrt(p)(i) = sqrt(1.0001)^i

Given the supported price-range of [2^-64, 2^64], the tick range for a Whirlpool is [-443636, 443636].

The Whirlpool account tracks both the current sqrt-price and the current tick-index.

Understanding Tick Spacing

Due to compute cost and rent constraints, it is often not economical for a Whirlpool to allow users to deposit liquidity into every single tick. Whirlpools requires pool owners to define an additional “Tick-Spacing” parameter. This allows them to define the space between “initializable ticks”, where liquidity information can be stored.

A tick-spacing of 5 means that liquidity can be deposited into tick-index that are a multiple of 5. (ex. […-10, -5, 0, 5, 10…]).

As a general rule, the smaller the expected volatility of a pool is, the smaller tick-spacing should be. To help you decide on the best tick-spacing for your whirlpool, consider the following attributes.

1. Granularity of user definable price ranges

The smaller your tick-spacing, the more granular the price users can deposit their liquidity in. For more stable pools, a more granular tick-spacing would let users define a tighter range to maximize their leverage.

Tick Spacing = 1

Price	Initializable Tick Index
1.0001^-2 = 1/1.00020001	-2
1.0001^-1 = 1/1.0001	-1
1.0001^0 = 1	0
1.0001^1 = 1.0001	1
1.0001^2 = 1.00020001	2

Tick Spacing = 100

Price	Initializable Tick Index
1.0001^-200 = 1/1.0202003198939318	-200
1.0001^-100 = 1/1.0100496620928754	-100
1.0001^0 = 1	0
1.0001^100 = 1.0100496620928754	100
1.0001^200 = 1.0202003198939318	200

2. Maximum price movement per swap

The size of the tick-spacing defines the maximum price movement a single swap can move the price by for a Whirlpool.

Whirlpool’s swap operates by iterating through each ticks with initialized liquidity. The larger the gap between initialized ticks are, the more it can theoretically traverse the price range.

A low tick-spacing pool undergoing a massive price movement may require multiple swap instructions to complete the price movement. Therefore, more volatile pairs that often has large price swings should look at higher tick-spacing to mitigate this pain point for their pool users.

3. Account rent cost for users

On-chain storage requires account space, and the more data a program needs to store, the higher the rent required. With larger tick-spacing, fewer ticks are needed to manage liquidity across a set price range, reducing the storage cost for users.