How to Deposit V3 Liquidity in Bittensor Subnet Pools: A Step-by-Step Guide

Ready to put your TAO and Alpha tokens to work? This practical guide walks you through depositing liquidity into Bittensor's Native V3 Pools.

Before You Begin

What You'll Need:

• TAO tokens in your Bittensor wallet
• Basic understanding that you may experience impermanent loss
• Access to a subnet with V3 pools enabled

Important: Not all subnets have V3 pools enabled. Only subnet owners can enable this feature, so you will need to check which subnets allow user liquidity provision.

Step 1: Find Subnets with V3 Pools Enabled

1. Navigate to the Subnet Screener Page
   • Look for the list of available subnets
   • Each subnet will show various metrics and icons

2. Identify V3-Enabled Subnets

   • Look for the "Liquid Icon" next to subnet names
   • If the Liquid Icon is active/clickable, that subnet has V3 pools enabled
   • If the icon is grayed out or missing, V3 pools are not available for that subnet

3. Click on the Liquid Icon

   • This will take you to the Liquidity Management page for that specific subnet
   • You'll see the deposit interface for that subnet's TAO/Alpha pair

Step 2: Understanding Uniswap V3 Price Ranges

Before depositing, it's crucial to understand how Uniswap V3 works:

Key Concept: Concentrated Liquidity

• Unlike traditional pools where your liquidity is spread across all prices (0 to infinity)
• V3 allows you to concentrate your liquidity within a specific price range
• You set a minimum price and maximum price for your position
• Your liquidity position only earns fees when trading happens within your chosen range

How Price Ranges Work:

• Min Price: The lowest price at which your liquidity will be active
• Max Price: The highest price at which your liquidity will be active
• Current Price: The real-time market price of the Alpha token relative to TAO

Example: If you set Min Price = 0.05 TAO and Max Price = 0.08 TAO:

• Your liquidity earns fees only when the Alpha token trades between 0.05 and 0.08 TAO
• If price moves below 0.05 or above 0.08, your position won't earn fees until price returns to your range

Step 3: Choose Your Price Range Strategy

Current Example: SN51 lium.io

• Current price: 1 SN51 = 0.063764 TAO

Based on where you set your price range relative to the current price, you'll need different tokens:

Scenario 1: Price Range Below Current Price (TAO Only)

When: Both min price AND max price are less than 0.063764 TAO

Example: Min Price = 0.050 TAO, Max Price = 0.060 TAO

• Deposit: Only TAO tokens needed
• Logic: Since current price (0.063764) is above your range, you start with 100% TAO
• What happens: As price falls into your range, TAO gradually converts to Alpha tokens

Scenario 2: Price Range Crossing Current Price (TAO + Alpha)

When: Min price is less than 0.063764 TAO AND max price is more than 0.063764 TAO

Example: Min Price = 0.050 TAO, Max Price = 0.080 TAO

• Deposit: Both TAO and Alpha tokens needed
• Logic: Current price is within your range, so you need both tokens
• Ratio: Depends on exactly where current price sits within your range

Scenario 3: Price Range Above Current Price (Alpha Only)

When: Both min price AND max price are more than 0.063764 TAO

Example: Min Price = 0.070 TAO, Max Price = 0.090 TAO

• Deposit: Only Alpha tokens needed
• Logic: Since current price (0.063764) is below your range, you start with 100% Alpha
• What happens: As price rises into your range, Alpha gradually converts to TAO

Step 4: Deposit Your Liquidity

1. Set Your Price Range

   • Use the interface to set your min and max prices
   • The interface will show you which tokens you need based on your range

2. Enter Token Amounts

   • For TAO-only scenarios: Enter your TAO amount
   • For Alpha-only scenarios: Enter your Alpha amount
   • For mixed scenarios: Enter amounts for both tokens as shown

3. Review and Confirm

   • Double-check your price range
   • Verify token amounts
   • Click the "Deposit Liquidity" button

4. Sign the Transaction

   • Enter your wallet password (in this case, Polkadot.js wallet)
   • Click "Sign the transaction" to confirm

5. Monitor Your Position
   • Your position earns fees when trading occurs within your price range
   • You can add more liquidity, remove liquidity, or collect fees at any time

Step 5: View Your Positions

After successfully depositing liquidity, you can view and manage your positions:

1. Navigate to Portfolio
   • Click on the "Portfolio" tab in the main navigation
   • You will see all your current Uniswap V3 positions

2. Position Information
   • Each position shows:
     • Position ID: Unique identifier for your position
     • Balance: Current token amounts in your position
     • Price Range: Your min and max price settings
     • Total Asset Value: Current TAO / USD value of your position

Step 6: Modify Your Liquidity

You can modify your existing positions by adding more liquidity or withdrawing some/all of your liquidity:

Withdrawing Liquidity

1. Access Modify Options
   • Click "Modify Liquidity" next to your position
   • This will take you to the liquidity management page

2. Choose Withdrawal Amount
   • Select how much liquidity you want to withdraw
   • You can choose partial withdrawal (e.g., 50%) or full withdrawal (Max)
   • Review the preview showing how much TAO and Alpha you'll receive

3. Complete Withdrawal
   • Click the "Withdraw" button
   • Sign the transaction in your wallet
   • Your TAO and/or Alpha that you deposited will be returned to your wallet balance + any accumulated fees

Important Note: Due to market fluctuations, the amount of TAO and Alpha you will receive after withdrawal might differ from the initial deposit amount.

Adding More Liquidity

1. Select Add Option

   • Choose to add more liquidity to your existing position
   • Enter the amount of additional liquidity you want to add

2. Review Requirements

   • The interface will show you how much additional TAO and/or Alpha you need
   • Ensure you have sufficient balances in your wallet

3. Confirm Addition
   • Review the transaction details
   • Click "Add" to proceed
   • Sign the transaction in your wallet

Key Tips for Success

Choose Your Range Wisely:

• Wider ranges = Lower risk of being out-of-range, but lower fee earnings
• Narrower ranges = Higher fee potential, but higher risk of price moving out-of-range

Risk Management:

• Monitor your position regularly
• Understand that token ratios will change as price moves through your range
• Be prepared for impermanent loss if you exit at unfavorable prices

Active Management Required:

• V3 positions need more attention than traditional liquidity provision such as Uniswap v2
• Consider adjusting ranges if price moves significantly

Remember: V3 liquidity provision is more complex compared to normal Uniswap V2 Pools. Please do due dilligence and research on how Uniswap V3 works.