Title:
Solana: How to Collect LP Fees If You Are the Only LP for a Raydium Pool with Minimal Impact
Introduction
As a platform that creates new tokens, mints them, and manages Raydium pools on Solana, you have likely been approached by users looking for help minting their own tokens or participating in Raydium pools. However, not all token creators have the same number of LP (liquidity provider) votes to influence the management of the pool. In this article, we will explore how a token creator can collect an LP fee if they are the only LP for a Raydium Pool with minimal impact.
Scenario
Let’s say you are a platform that has created 10,000 SOL tokens and minted them into two Raydium pools: Pool A and Pool B. Each pool is owned by one of your users, who contributes $1,000 in SOL to the LP for each pool. As the creator of these platforms, you have created an initial voting structure for both pools with an equal number of votes for each user.
The scenario unfolds as follows:
- User A has 10,000 SOL tokens minted and decides to participate in Pool B.
- You have 2 users (User X and User Y) who contribute $1,000 in SOL to the LP for each pool.
- Since there are two pools with the same voting structures, you will have a total of 4 votes from the first LP contributors.
Problem
If all token creators contributed equally and had the same number of tokens minted, the success of your platform would increase. However, in this scenario, User A is the only contributor to Pool B, while the other two users (X and Y) are still contributing their SOL liquidity to the LP for both pools.
Solution:
If you want to collect LP fees from a single user who has contributed minimally to the governance of the pool, you need to take a different approach. You can do the following:
- Create a token that incentivizes participation: Introduce a new token (e.g. T) that is created and minted separately from the existing SOL tokens. This token will be used for voting purposes.
- Use a 51% voting system: Create a voting system where LP contributors vote on whether to approve or reject proposals that affect the governance structure of the pool. In this scenario, you can allow users X and Y (the two contributing users) to have their T tokens as part of a voting pool, with their votes weighted based on their SOL contribution.
- Weighted voting: Assign different weights to each user’s votes based on their SOL contribution. This ensures that more active contributors (e.g. User X and Y) have disproportionate weight in the decision-making process.
Example:
Assume that the current fund governance structure has 10,000 T tokens with equal weight for all contributors. Let’s say you want to increase the voting threshold from 50% to 60%. Procedure:
- Create a new token (T) that is created and minted separately.
- Assign 1,000 T tokens to User X, who will contribute $100,000 in SOL.
- Assign another 5,000 T tokens to User Y, who will also contribute $500,000 in SOL.
In this scenario, User X has 6,500 T tokens (1,000 + 5,000) out of a total of 11,500 T tokens. As a result, they will have 55.6% of the voting rights, while User Y will only have 44.4%.
Conclusion
While collecting LP fees from users with minimal impact can be challenging, there are ways to do it effectively. By introducing a new token that incentivizes participation and using a weighted voting system, you can ensure that the success of your platform does not depend solely on the contributions of a single user. This approach will encourage more users to participate in the governance process, leading to increased liquidity and better decision-making for your Raydium funds.