Lesson 2.3 - What are Bins & Bin Steps?

Overview

To achieve concentrated liquidity, the continuous spectrum of price space has been partitioned with price bins. Price bins are the boundaries between discrete areas in price space.

What Are Bins?

A bin is a container that holds liquidity at a specific price point within a pool. Think of it like a bucket sitting at one spot on a price ladder.

• What can a bin hold?
• One token only
• Both tokens (only the active bin can hold both)
• Empty (no tokens at all)
• How swaps work with bins:
• Swaps happen inside the active bin, exchanging one token for the other
• Once all of one token is converted, the price moves to the next bin
• Key benefit: Unlike classic AMMs where every trade moves the price, HODLMM's bin system lets trades execute at a fixed price within the active range

Zero price impact within the active bin

Concentrated liquidity means deeper depth at the current price (bin), so typical trades execute without moving the market

• Want to learn more? Read more about Slippage & Price Impact.

What are Bin Steps?

A bin step is simply the difference in price between 2 consecutive bins. The bin step for any given pool is determined by basis points. Think of it like steps on a staircase — each step takes you to a slightly different price level.

• How it works:
• Bin steps are measured in basis points (1 basis point = 0.01%)
• To find the next bin price: multiply the current price by (1 + basis points)
• To find the previous bin price: divide instead
• Quick examples:
• 1 bin step = 0.0001 (0.01%) between bins
• 10 bin step = 0.001 (0.10%) between bins
• 100 bin step = 0.01 (1%) between bins

Bin Mechanics

Price bins function as boundaries for liquidity positions. When a position is created, the provider must choose the bins that will represent their position's borders.

• Bins are spaced such that each bin represents a specific price point. Unlike continuous curves, trades execute at the exact bin price when liquidity is available.

Bin Distribution

The spacing and distribution of bins depends on the selected strategy:

• SPOT Strategy: Bins distributed uniformly across the selected range
• CURVE Strategy: Bins concentrated near the current price with decreasing density at range edges
• BID-ASK Strategy: Bins placed primarily at range boundaries

Custom Bin Layouts

Beyond the three pre-configured strategies, LPs can define custom bin layouts to implement specific market-making strategies. This allows for precise control over liquidity distribution.

Crossing Bins

When a swap size exceeds the liquidity in a single bin, the trade will consume liquidity from multiple bins sequentially. Each bin crossed may have a different price, resulting in slippage only when crossing bin boundaries.

Bin State

Each bin maintains:

• Total liquidity available
• Current price level
• Number of active positions
• Fee tier applicable