Case study: DAMM vs a sophisticated competitor on [TOKEN]/WETH

TL;DR — DAMM is 6.2x more capital efficient than Competitor on the WETH/[TOKEN] pool (Base, Aerodrome Slipstream, 0.3% fee tier) over a 28-day window.

Note: for this case study, one of the tokens in the pair has been redacted and replaced with "TOKEN", and the competing market maker is unnamed, in honor of client confidentiality.

Capital efficiency in numbers:

• 6.2x more fees per ETH deployed (DAMM vs Competitor)
• 0.28 ETH to capture 1% of pool fees (DAMM) vs 1.73 ETH (Competitor)
• DAMM deploys only 15% of total capital as active liquidity, keeping 85% in reserve — yet matches Competitor's fee APY on total capital with 18x less total capital

Why the ETH difference? DAMM deploys 1.19 ETH on average; Competitor deploys 141.35 ETH — 119x more. Despite this, DAMM captures 4.2% of all pool fees vs Competitor's 81.7%. Per ETH deployed, DAMM earns 6.2x more fees (38.6% vs 6.3% fee APY).

The gap comes down to risk exposure: Competitor spreads capital across ~25,000 ticks with wide, static positions rebalanced every two weeks. DAMM concentrates into ~3,000 ticks centered on the current price, rebalanced daily. When [TOKEN] dropped 11.3% against WETH, Competitor's wide exposure meant higher absolute impermanent loss (−9.83 ETH vs −0.074 ETH), and their fees only recovered 6.9% of that loss. DAMM's fees recovered 47.6% of its IL — meaning DAMM's net cost of market making was −3.25% on deployed capital vs Competitor's −6.47%, making Competitor twice as expensive, with higher risk.

Strategy structure: DAMM runs 2 concentrated positions (3,000 ticks total, ~±1,500 from current price) rebalanced daily to track price. Competitor runs 2 wide positions (~25,000 ticks total) rebalanced roughly biweekly. DAMM's positions are symmetric and centered; Competitor's are asymmetric and static.

Pool: WETH/[TOKEN] Aerodrome Slipstream (Base) — 0.3% fee tier · Period: 28-day window · Swaps analyzed: 7,527

Results

DAMM earns 6.2x more fees per ETH deployed than Competitor. With 1/119th of the capital, DAMM captures 4.2% of all pool fees.

Fee APY on total capital

DAMM's bot deploys only a fraction of total capital — 15%. Competitor deploys 100%.

At 15% exposed capital, both LPs earn approximately the same fee APY on total capital, but DAMM does so with materially lower risk. With only a small portion of capital deployed, DAMM is far less vulnerable to adverse market moves. Keeping 85% of capital in reserve also gives DAMM greater flexibility to rebalance and adapt when market conditions shift.

Price coverage

DAMM captured 100% of swaps during this 28-day window. Every swap, every day. Zero misses.

Strategy comparison

Note: Competitor recently abandoned a previous 5-position barbell strategy (full-range + narrow layers) in favor of 2 wide positions rebalanced infrequently. This explains the low 6.3% fee APY — their capital is spread across 25,000 ticks while price moves within a ~2,000-tick corridor.

Cost of market making

DAMM achieves the same market depth per dollar at 6.2x lower cost on deployed capital.

Net P&L: fees vs impermanent loss

[TOKEN] depreciated 11.3% vs WETH during this 28-day window. Both LPs lost money. The question is how much.

Conclusion

In a month where [TOKEN] fell 11.3% against WETH, DAMM's net cost of market making was −3.25% on deployed capital. Competitor's was −6.47% — twice as expensive.

Three facts drive this:

1. DAMM's fees offset half its IL. Fee income covered 47.6% of impermanent loss, vs only 6.9% for Competitor. Concentrated liquidity earns proportionally more fees per unit of capital exposed.
2. DAMM's IL was lower as a percentage. Tighter positions with daily rebalancing produced 6.21% IL vs Competitor's 6.95% — the active tracking limits exposure during sustained directional moves.
3. DAMM does this with 119x less capital. The absolute cost of DAMM's market making was 0.039 ETH. Competitor spent 9.15 ETH to provide liquidity in the same pool, in the same month, with a worse net outcome per dollar.

For a token issuer comparing MM providers: DAMM delivers the same depth per dollar at a fraction of the cost, loses less during adverse price moves, and recovers more of those losses through fees.

Methodology

• Fee attribution: For each of 7,527 swaps, we reconstruct both LPs' active liquidity at the swap tick from on-chain mint/burn events, then compute pro-rata fee share as LP_liquidity / pool_total_liquidity.
• Net P&L: Position values computed at window boundaries using Uniswap V3 liquidity math (getAmount0/getAmount1), validated against on-chain mint amounts (<2% error). IL = (end_value − start_value) − net_deposits. Net P&L = IL + fees.
• Position attribution: NFPM Transfer event logs via eth_getLogs RPC, matching tx_hashes against pool mint/burn events.
• Capital: Average WETH + [TOKEN] deployed per rebalance, converted at median [TOKEN]/WETH price.
• APY: (metric / capital_ETH) × (365 / 28) × 100

Analysis: 7,527 swaps, 28-day window, tick-level pro-rata fee attribution and position valuation from on-chain data.