Liquidity Provider Guide

This guide walks you through supplying SOL to Moono Protocol’s liquidity pool and earning interest from borrowers who launch tokens on pump.fun.

Prerequisites

• A Solana wallet (Phantom, Solflare, or any compatible wallet)
• SOL you want to deposit as liquidity

How LP Earnings Work

When borrowers take loans to launch tokens, they pay interest. That interest goes to the liquidity providers whose deposits funded the loan. Your earnings depend on:

1. Which tick you deposit into — higher ticks earn higher interest per hour
2. How often your liquidity is utilized — you only earn when your SOL is actively lent out
3. Loan durations — longer loans mean more interest per loan

See Economics for the full interest model.

Step 1: Register Your Profile

If you haven’t already, create a User Profile (same for borrowers and LPs):

• Connect your wallet to the Moono app
• Click Register
• Approve the transaction (0.01 SOL registration fee + rent)

Step 2: Choose Your Tick

The most important decision as an LP is which tick to deposit into. The protocol has 1,024 ticks (numbered 0–1,023), each with a different interest rate:

tick_hourly_rate_ppm = min(2048, 2 + tick_index × 2)

Tick Selection Strategy

Tick Range	Hourly Rate	Trade-off
0–50 (low)	0.0002%–0.0102%	Low rates, but your liquidity is borrowed first
50–250 (mid)	0.0102%–0.0502%	Balanced rate and utilization
250–500 (high)	0.0502%–0.1002%	Higher rates, but only used when lower ticks are depleted
500–1023 (max)	0.1002%–0.2048%	Highest rates, but rarely utilized unless demand is very high

Tip

Loans are filled from the lowest tick upward. If you deposit in tick 0, your liquidity will be the first to be borrowed — you’ll earn less per loan, but your SOL is utilized more frequently. Higher ticks earn more per loan but may sit idle longer.

Shared Interest Bonus

In addition to the per-tick rate, every loan pays a shared interest surcharge that is distributed proportionally across all participating ticks. This significantly boosts the effective yield, especially for lower ticks. See Economics — Shared Interest for details.

Step 3: Open a Position

1. Select the tick you want to deposit into
2. Enter the amount of SOL to deposit
3. Click Deposit and approve the transaction

Your SOL is transferred to the protocol’s quote vault, and you receive LP shares representing your position in that tick.

Initial Share Price

When a tick has no existing deposits, you receive shares at a 1:1 ratio (1 SOL = 1 share). When depositing into a tick that already has deposits and earned interest, your shares are calculated at the current share price:

your_shares = deposit_amount × tick_total_shares / (tick_balance + tick_borrowed)

This means you’re buying in at the current value, including any accumulated interest — you don’t dilute existing LPs and they don’t dilute you.

Step 4: Monitor Your Position

Once deposited, your SOL may be:

• Available — sitting in the tick, not currently lent out
• Borrowed — actively lent to a borrower, earning interest

You can track:

• Your share count and current share value
• How much of your tick’s liquidity is currently borrowed
• Interest earned (reflected in the increasing share price)

How Interest Accrues

You don’t receive interest payments directly. Instead, when loans are repaid, the interest is added to the tick’s balance. This increases the value of each share:

share_value = (tick_balance + tick_borrowed) / tick_total_shares

Over time, as more loans are repaid with interest, your shares become worth more SOL.

Step 5: Add More Liquidity

You can deposit additional SOL into your existing position at any time:

1. Navigate to your open position
2. Enter the additional amount
3. Approve the transaction

New shares are minted at the current share price, so your total share count increases.

Step 6: Withdraw

When you want to withdraw some or all of your liquidity:

1. Navigate to your position
2. Enter the number of shares to redeem (or select max)
3. Click Withdraw and approve the transaction

Your shares are burned, and you receive SOL at the current share price:

withdrawal_amount = your_shares × (tick_balance + tick_borrowed) / tick_total_shares

Withdrawal Limitations

You can only withdraw SOL that is not currently lent out:

max_withdrawable = your_shares × tick_balance / (tick_balance + tick_borrowed)

If a large portion of your tick’s liquidity is currently borrowed, you may not be able to withdraw the full amount immediately. Wait for loans to be repaid or liquidated.

Note

This is not a lock-up — it’s a natural constraint of the lending model. Your SOL is earning interest while it’s borrowed. Once the loan is repaid or liquidated, the liquidity becomes available for withdrawal.

Step 7: Close Position

When you’ve withdrawn all your shares and want to clean up:

1. Ensure your share balance is 0
2. Click Close Position
3. Approve the transaction

This reclaims the Solana rent from the position account.

Risks

Liquidation Risk

If a borrower’s token crashes in price and the collateral + migration reserve don’t cover the full loan, the tick takes a loss. This means your shares may be worth less SOL than you deposited.

The migration reserve (up to ~14.1% of loan amount) provides a buffer, but extreme price drops can still result in partial losses.

Utilization Risk

If you deposit in a very high tick that is never utilized, your SOL earns nothing. Meanwhile, it’s locked in the protocol (though you can withdraw at any time since it’s not borrowed).

Smart Contract Risk

As with any DeFi protocol, there are inherent smart contract risks. While the protocol is designed with safety in mind, no smart contract is guaranteed to be bug-free.

Tips

• Diversify across ticks — consider splitting your deposit across several ticks for a balance of utilization and rate
• Monitor utilization — if your tick is rarely borrowed, consider moving to a lower tick
• Compound earnings — periodically withdraw and re-deposit to compound your interest earnings
• Start with popular ticks — check which ticks are actively being borrowed to gauge demand