A case study on 398 days of Uniswap v3 stablecoin market making on Arbitrum, as of September 4, 2025.
This report is aimed at showing other metrics and impacts (not solely LP profitability) — but for the record: the average return for LPs was around 11.5% for the whole period.
We were doing it self-custodially, meaning we didn't want to accept more deposits for legal reasons. We only made it available to whitelisted investors in September 2025.
Introduction
DAMMstable is an algorithmic stablecoin liquidity provision fund designed to generate risk-adjusted returns while strengthening the health of decentralized finance (DeFi) ecosystems. Beyond investor performance, DAMMstable plays a critical role in deepening and improving the efficiency of liquidity across stablecoin pairs.
This report analyzes how DAMMstable has contributed to the DeFi ecosystem over its 398-day track record, initially as a custodial fund and more recently as a decentralized Lagoon fund. The fund has operated in three 0.01% fee pools on Uniswap v3:
- USDC/USDT
- USDC.e/USDT
- DAI/USDT
Liquidity efficiency: Fee Multiplier Ratio
A key measure of DAMMstable's contribution is how efficiently it provides liquidity relative to its share of pool TVL.
Methodology:
- For every position taken, calculate the % of total pool TVL represented.
- Compare it to the % of pool fees captured during the position's lifetime.
- Define the Fee Multiplier Ratio (FMR) = (% Fees Captured) ÷ (% TVL).
- A ratio > 1 means the position earns a disproportionate share of fees, signaling superior capital efficiency.
Results:
- Over 398 days, DAMMstable took 3,370 liquidity positions.
- Average Fee Multiplier Ratio = 3.28.
Interpretation: DAMMstable's capital was consistently positioned in tight, high-usage ranges, earning more than 3× its "fair share" of fees relative to TVL. This demonstrates that DAMMstable not only concentrates liquidity but also places it correctly, enhancing execution quality for traders while amplifying fee capture for LPs.
Volume serviced vs. fund capital
Another KPI tracks the trading activity supported by DAMMstable's liquidity.
Methodology:
- From fees collected, deduce the underlying trade volume serviced.
- Compare total serviced volume to DAMMstable's capital base.
Results:
- Total volume serviced: $526 million
- Average daily volume serviced: $1.3 million
- Average fund TVL: $221k
- Volume/TVL ratio: 5.96
Interpretation: On any given day, every 5.96 of trading volume**. This high turnover ratio highlights DAMMstable's role as a liquidity amplifier, enabling outsized economic activity relative to its size. For the ecosystem, this translates into tighter spreads, lower slippage, and deeper order books for stablecoin swaps.
Capital efficiency
Another critical KPI is how effectively DAMMstable converts investor capital into active, working liquidity.
Findings since Lagoon launch:
- Average allocation to Uniswap positions: 99% of fund capital.
- Capital efficiency within allocation: 99.9%.
This means nearly all fund capital is consistently deployed in live, minted positions, with only 0.1% left idle as unutilized ERC-20 balances of token0 or token1.
Interpretation: Such efficiency demonstrates:
- Minimal idle capital — investor funds are always working.
- High utilization — liquidity is continuously active, compounding fee generation.
- Ecosystem benefit — more stable, predictable depth in the stablecoin pools DAMMstable supports.
Ecosystem impact
DAMMstable's liquidity provision directly benefits the broader DeFi ecosystem by:
- Deepening markets — Concentrated liquidity ensures stablecoin trades clear with minimal slippage.
- Efficient capital allocation — High Fee Multiplier Ratios show capital is strategically deployed where traders need it most.
- Sustaining decentralized infrastructure — Transition to the Lagoon fund improves transparency and accessibility.
- Maximizing capital efficiency — With 99.9% utilization, virtually all capital strengthens ecosystem liquidity.
- Enhancing user experience — Traders experience more predictable execution, while protocols relying on stablecoin liquidity (lending, leverage, derivatives) benefit from robust base pairs.
Conclusion
DAMMstable is not only an algorithmic yield-generating vehicle but also an ecosystem enabler. Its 3.28x fee efficiency and 5.96x volume multiplier demonstrate how algorithmic liquidity provision can magnify the depth and quality of DeFi's most critical markets: stablecoins.
By continuing to refine its strategies and operating fully decentralized, DAMMstable sets a standard for how market-neutral funds can deliver both investor returns and public goods to the DeFi economy.