Liquidity Provider Checklist

Use this checklist before entering any LP position. Print it out or save it for reference.

Pre-Investment Research

Understand the tokens Do you know what both tokens are and why they exist?

Verify token contracts Confirmed addresses from official sources (CoinGecko, official docs)

Check Token Sniffer scores Both tokens score 70+ with no major warnings

Review protocol audit status DEX/protocol has been audited by reputable firm

Tokenomics Check

Check token unlock schedules No major unlocks coming that could dump price

Review holder distribution Top 10 holders don't hold more than 50% of supply

Understand inflation/emissions Know if tokens are inflationary and at what rate

Pool Selection

Check pool TVL Sufficient liquidity for your position size

Review trading volume Active trading generates fees for LPs

Select appropriate fee tier Match fee tier to pair volatility (0.05% stable, 0.3% standard, 1% volatile)

Understand impermanent loss risk Calculated potential IL for expected price range

Range Selection (v3/Concentrated Liquidity)

Set appropriate price range Based on expected volatility and management frequency

Consider management time Narrower range = more management needed

Plan rebalancing strategy Know what you'll do if price exits range

Position Sizing

Apply position size limits No more than 20% of portfolio in any single pool

Protocol allocation limits No more than 30% in any single protocol

Consider gas costs Position large enough that gas doesn't eat profits

Before Confirming Transaction

Double-check token amounts Correct amounts for each token

Verify pool/contract Interacting with correct, verified contract

Check gas price Not overpaying during congestion

Review approval amounts Consider limited approvals vs. unlimited

Post-Deposit

Record entry details Date, amounts, prices, tx hash for tax purposes

Set up position tracking Added to DeBank, Revert Finance, or other tracker

Set monitoring reminders Schedule to check position daily/weekly

Define exit criteria Know when you'll exit (IL threshold, time, etc.)

Remember: Never invest more than you can afford to lose. LP positions carry impermanent loss risk, smart contract risk, and token risk. This checklist helps but doesn't eliminate risks.