Parameters

This section describes Kandel's parameters. For more contextual information, head over to the visual explanation.

Parameters	Description
Pair	The pair represents the chosen market on which a Kandel strategy is running (along with the technical tick spacing). Example: ETH/USDC is a trading pair
Price range	The price range is needed to run any market-making strategy. It consists of the lowest and highest prices in the price grid at which Kandel instance posts its bids and asks. Example of a price range: • Lowest price = 1000 USDC per ETH • Highest price = 1500 USDC per ETH
Current price	The current price of the base token that is used for constructing the price distribution. Example: the price of ETH is used for the ETH/USDC pair
Number of price points	The number of price points on which Kandel will deploy its liquidity (bids and asks).
Ratio	The ratio defines the distance between price points which is derived using geometric progression. Example: • Ratio is 0.01 (due to ticks it will not be exact) • Mid price is 1000 • Price point below mid price: 10000.99 • Price point above mid price: 10001.01 Additionally, the ratio could be derived from price points PricePoint(i+1) / PricePoint(i) - 1. Example: 1010 / 1000 - 1 = 0.01
Step size	It is the distance between an executed bid/ask and its dual offer. Whenever a Kandel ask is taken at a given price point, Kandel uses the amount of quote just received to place a bid at a lower price point. With a step size of 1, it will place the bid at the price point immediately below. With a step size of 2, Kandel will repost two price points below, etc. (Technical aside: if in attempting to repost say 3 steps below Kandel hits the boundaries of its range it will transport as far below as possible). The same applies symmetrically for bids. Using a step size ≥ 2 allows one to publish a more continuous liquidity on the books, regularising the strat’s PnL, while at the same time keeping a reasonable spread between price points. Indeed, what matters to PnL is not the distance between price points, but how far money moves along the price grid each time an offer is taken.
Initial inventory	The initial inventory is the amount of base tokens and quote tokens that must be deposited into the strategy. The minimum to be deposited into the strategy depends on the selected price range and density of the selected market. Example on the ETH/USDC pair: • Base token is ETH • Quote token is USDC
Bounty	It is the required amount of native tokens to be deposited into the strategy. A provision is required to post an offer, in order to pay a potential bounty. The bounty is only a subset, smaller in value than the provision. The provision covers the whole price grid, hence: • Kandel provision = Provision per offer x Number of price points x 2 • Note: we add a "x2" factor since each price point could be both an ask and a bid. Example: if the selected pair is on the Polygon network, the bounty would be an amount of MATIC tokens.