What Is Raydium? Solana's Flagship AMM and Its Liquidity Pools, Explained With Real Numbers

Raydium is Solana's flagship automated market maker (AMM), a decentralized exchange where prices come from liquidity pools instead of order books. A liquidity pool is a shared vault holding two tokens, and anyone who deposits the pair becomes a liquidity provider (LP) who earns a slice of every swap fee that pool collects.

That one sentence hides real money mechanics. Raydium runs three pool programs side by side, and the most common fee setting takes 0.25% of each trade, with most of it flowing straight to the people who supplied the tokens. The pools hold on the order of a billion dollars across thousands of pairs on the Solana network, and they price a large share of everything that trades on the chain. Deposit into a busy pool and your share of those fees accrues trade by trade, around the clock.

The fee income is real, but so is the fine print, because a pool can pay you fees all year and still leave you behind someone who simply held the two coins; this guide walks through both sides with dollar examples.

How a Raydium pool pays you

Every swap in a Raydium pool pays a fee, and liquidity providers collect most or all of it. The default fee is 0.25% of the trade: standard pools send 88% of it to LPs and keep 12% for the protocol, while the newer CPMM pools currently pass LPs everything (source: Raydium fee comparison documentation).

Here is the plumbing in plain terms. A pool such as SOL/USDC holds both tokens, and a formula sets the exchange rate from the balance between them. Traders swap against the vault, and each swap leaves the fee behind in the pool. Because your deposit represents a fixed share of the vault, the fees make your share worth slightly more with every trade. You do not receive a payout in the mail; the value grows inside the position, and you realize it when you withdraw. If you want the general theory behind pool pricing, Blofin's guide on how AMMs work in general covers the curve math; here we stay on what Raydium specifically does with it.

A worked example makes the yield concrete. Say you deposit $10,000 into a SOL/USDC pool holding $5 million, which makes your share 0.2%. If the pool clears $1 million in swaps in a day at a 0.25% fee, it collects $2,500. In a pool type where all of that goes to LPs, your slice is about $5 for the day, roughly 18% a year if the pace holds. Volume is the engine, and volume moves with the market, so treat any yield figure as a snapshot rather than a promise.

Where does the protocol's cut go when there is one? Raydium has historically used it to buy back RAY, its own token, and to fund the treasury. You never need RAY to provide liquidity, though, and all LP earnings arrive in the pool's own two tokens, priced against the SOL token and the rest of the market. How much you earn, and how you collect it, depends on which of Raydium's three pool types you choose.

The three pool types: standard, CPMM, and concentrated

Raydium runs three AMM programs in parallel. AMM v4 is the original standard pool, locked at a 0.25% fee and no longer recommended for new pairs. CPMM is its modern replacement, with fee tiers of 0.01%, 0.25%, and 1%. CLMM is the concentrated-liquidity pool, where you pick a price range and earn only while the price stays inside it.

The differences decide what you hold, what you earn, and how much attention the position demands:

Two rows deserve a closer look. First, the receipt. Standard pools hand you LP tokens, which are ordinary fungible tokens that prove your share and can be staked in Raydium farms for extra rewards. A CLMM position is different: it is recorded as an NFT tied to your exact price range, it is not interchangeable with anyone else's, and Raydium farms do not accept it. Second, the token standard. CPMM and CLMM pools support Token-2022, the newer Solana standard whose extensions allow features like built-in transfer fees (source: Solana Token Extensions documentation). That flexibility matters for LPs because a token's own transfer fee stacks on top of the pool's swap fee, a trap covered in the risk section below. For the full story on the standards themselves, see Blofin's explainer on SPL and Token-2022 standards.

AMM v4 carries one historical quirk: it was built to share liquidity with an on-chain order book, and that connection is no longer active, so it now behaves as a plain standard pool. New deposits belong in CPMM or CLMM, and CLMM is where the biggest yields, and the sharpest edges, live.

Inside a CLMM range: more fees, sharper edges

A CLMM (concentrated liquidity market maker) position commits your capital to a chosen price band instead of the whole curve, so your tokens do far more work while the market trades inside it. Raydium's pool-selection guide estimates a managed range can capture 4 to 40 times more fees per dollar than a standard pool (source: Raydium pool-selection guide).

The catch sits at the edges. When the price leaves your range, the position stops earning entirely, and it converts fully into one of the two tokens. Suppose SOL trades at $160 and you deposit $10,000 split evenly into a SOL/USDC range of $120 to $200. If SOL climbs to $200, the pool has sold your SOL on the way up, and you now hold only USDC, worth about $11,180 in Raydium's documented example. If SOL keeps running to $240, you still hold that same USDC while a plain holder sits on $12,500, so your position lags by roughly 10.6% (source: Raydium impermanent-loss documentation). A standard full-range pool would have lagged by only about 2% on the same move and kept earning fees the whole way.

That is the trade in one picture: concentrated positions harvest more fees inside the band and give up more when the market escapes it. Tight ranges suit pairs that move together, such as SOL paired with the liquid staking tokens that track it, because the two prices rarely drift far apart. Wide ranges, or plain CPMM pools, suit volatile pairs and anyone who does not want to watch charts.

Managing a range also means rebalancing. When the price drifts to an edge, you close the position, take the conversion loss to that point, and open a new range around the new price. Each rebalance is a few cheap transactions thanks to Solana's fee and speed design, but the discipline is on you. The program that enforces all of this is open source, so anyone can audit how ranges, ticks, and fee accounting work (source: Raydium's open-source CLMM program). One more mechanical note: CLMM fees do not compound on their own. They pile up next to the position, and you claim them with a button press, which is worth doing on a schedule so the earnings go back to work.

Adding liquidity, step by step

Providing liquidity on Raydium takes about ten minutes the first time. You need a Solana wallet, a little SOL for network fees, and a balanced value of the two tokens you want to deposit. The flow below uses the standard-pool path, which is the sensible default for a first position.

1. Set up a self-custody wallet. Most Solana users start with Phantom; Blofin's walkthrough on setting up Phantom covers it from install to backup.
2. Fund it. That usually means buying SOL on an exchange and then sending it to your wallet. Keep at least 0.05 SOL spare for fees and account deposits.
3. Get both sides of the pair. If you hold only SOL, swap half its value into the other token; swapping on Jupiter is the usual route, and it often fills through Raydium's own pools anyway.
4. Open raydium.io, connect the wallet, and open the Liquidity tab. Type the pair, then check the pool's TVL (total value locked, the deposits inside), its 24-hour volume, and its fee tier. Busy pools with deep liquidity are the honest signal; a triple-digit APR label on a dead pool is not.
5. Verify the tokens. Anyone can create a token with a famous name, so confirm the mint address against the project's official site before depositing anything.
6. Enter an amount, approve, and confirm. The interface takes both tokens in one deposit and returns LP tokens to your wallet. Withdrawing later reverses the same screen: burn the LP tokens, receive your share of the vault plus accumulated fees.

Start small enough that a mistake is tuition, not damage. A $100 first position teaches you the entire cycle, deposit to withdrawal, before real size is on the line. And before any real size goes in, read the next section, because the risks are specific and they have receipts.

What can go wrong: the honest risk list

Liquidity providing carries risks that holding does not, and the largest one is built into the design. Impermanent loss, better read as divergence loss, is the gap between your LP position's value and what simply holding the two tokens would be worth. It appears whenever the pair's prices drift apart, and withdrawing while they are apart makes it permanent.

The size is knowable in advance, and the impermanent-loss documentation cited in the range section above publishes the reference figures. If one token doubles against the other, a standard pool position ends up about 5.7% behind holding; a 50% rise costs about 2%; a 75% crash in one side leaves you 20% behind. Fees exist to pay you through that drag, and the same page offers a useful rule of thumb: a pair running about 80% annualized volatility, typical for SOL against a stablecoin, needs roughly 8% in fee APR just to break even on divergence. A memecoin pair can run hot enough that divergence eats 20% to 50% a year, which no realistic fee stream outruns. Never accept the framing that an LP cannot lose; you can end up behind holding, and on a collapsing token you can end up holding mostly the collapsing token.

Protocol history is the second risk, and Raydium's record has two entries worth knowing:

Both incidents were made whole or covered, which is a better record than much of DeFi, but they prove the category risk: smart-contract code and admin controls can fail, and old, forgotten code can fail years later. Raydium publishes its audit history per program, which is worth a skim before you deposit size (source: Raydium security audit history). Network risk sits underneath everything as well; Solana's uptime record is largely a solved story, but an LP cannot withdraw during a halt.

Token-level traps round out the list. A Token-2022 mint can carry its own transfer fee, and it compounds with the pool's swap fee: Raydium's documentation walks an example where a nominal 0.25% pool produces an effective cost near 3.7% once a 1% inbound and 0.5% outbound transfer fee stack on. Some extensions also allow freezing or delegated control of balances. On long-tail tokens, check the mint's extensions before you LP, or stay with majors while you learn. Finally, farm rewards: pools sometimes advertise boosted APRs from bonus token emissions, and those emissions can end or crash in price. Judge a pool first on real swap-fee volume, and treat farm tokens as a bonus, never the thesis.

Should you provide liquidity or just stake SOL?

Staking is the cleaner yield for most beginners, and liquidity providing is the more powerful tool for people willing to manage it. Native staking SOL pays roughly 5.5% to 6.5% a year with no divergence risk against SOL itself, so that range is the benchmark any LP position must beat after impermanent loss, not before.

A fee APR of 18% on a SOL/USDC pool sounds like triple staking, but subtract the roughly 8% divergence break-even from earlier and the honest edge is thinner, and it demands attention besides. The decision grid below paraphrases the pool-selection guidance from Raydium's documentation, linked in the range section earlier, for a beginner reader:

From Blofin's operational perspective running live SOL spot and perpetual markets, Raydium pool depth is one of the liquidity signals our desks watch, because when a major on-chain SOL pool thins out, arbitrage slows and spreads widen across venues within minutes; deep pools are infrastructure, not just yield products. That is also the honest way to think about your own deposit: you are being paid to provide a service, and the pay is proportional to the risk and the work.

If you want passive and predictable, stake. If the mechanics above read as interesting rather than exhausting, start with $100 in a major-pair CPMM pool, track it for a month against simply holding, and let the data decide. RAY itself, for what it is worth, remains one of Solana DeFi's oldest tokens, and its market stats are easy to monitor alongside your position (source: CoinMarketCap's Raydium page).

Frequently asked questions

Do I need RAY tokens to provide liquidity on Raydium?

No. Any supported pair can be deposited without holding RAY at all, and your earnings accrue in the pool's own two tokens. RAY is Raydium's native token, and the protocol's cut of trading fees has historically funded RAY buybacks and staking rewards, so the token benefits from pool activity rather than gating it. Holding RAY is a separate decision from being an LP.

Can I deposit just one token instead of a pair?

Yes, in one specific case. A CLMM position opened with its range entirely above or below the current price can be funded with a single token, and the pool sells it into the other side as the price crosses your range. It behaves like a limit order that earns fees while filling. Standard pools do not offer this; they always take both tokens at the current ratio.

What is Burn & Earn on Raydium?

Burn & Earn permanently locks a liquidity position while preserving the right to collect its trading fees. The locker receives a Fee Key NFT that claims fees forever, but the underlying tokens can never be withdrawn. Token teams use it to prove their liquidity cannot be pulled, which addresses the classic rug-pull setup. For an ordinary LP it is rarely appropriate, because the lock is truly irreversible.

If I provide liquidity on Raydium, where do the traders come from?

Mostly from aggregators, and that is good for you. Jupiter, which routes the large majority of Solana swap volume, constantly scans Raydium pools and sends orders wherever execution is cheapest. Wallets, bots, and other apps route the same way. Your pool earns from all of it, so a Raydium LP collects fees from trades placed by people who never opened raydium.io.

What happened to Raydium's order book integration with Serum?

It ended, and Raydium is now a pure AMM. The original 2021 design placed pool liquidity onto Serum's central limit order book, which was Raydium's headline feature. After Serum's collapse in late 2022, its successor OpenBook filled the role for a while, but the legacy standard pools no longer share liquidity to any order book. Older articles describing the hybrid design are out of date.

Are LP rewards paid out in RAY?

No, base earnings are not. Swap fees accumulate in the two tokens of your pool, either compounding inside a standard position or claimable from a CLMM position. RAY only enters the picture if you stake eligible LP tokens in a farm that emits RAY, or another reward token, on top of trading fees. Those emissions are separate, finite programs with their own schedules.

Researched and written by the Blofin Academy editorial team with AI-assisted drafting. Primary sources include the Raydium protocol documentation (fee comparison, impermanent loss, pool selection, and security audit pages), Raydium's open-source CLMM program repository, Solana's Token Extensions documentation, Neptune Mutual's analysis of the December 2022 incident, reporting from The Crypto Times and KuCoin News on the June 2026 legacy-pool exploit, and CoinMarketCap market data. All facts independently verified against cited documentation current as of July 2026.

This article is for informational purposes only and does not constitute financial advice, investment guidance, or a recommendation to buy, sell, or hold any digital asset. Cryptocurrency markets involve significant risk and you should conduct your own research and consult qualified professionals before making investment decisions. Blofin Academy content reflects the state of public information at time of publication; protocol parameters, fees, and ecosystem data change frequently.