ABSTRACT
Liquidity provider (LP) positions earn trading fees, but they are awkward to hold. Fees accrue outside the position and must be claimed and re-deposited by hand, and on many venues the position is a non-fungible record that cannot be traded, lent or split. We propose Splice, a Solana program that wraps one full-range liquidity position per asset pair into a fungible SPL token. Any account can trigger a compound instruction that folds accrued fees back into the position, so each token is backed by a growing quantity of both assets. We describe the share accounting, show how value per token relates to the underlying prices, and give the conditions under which compounded fees offset divergence loss. We pay particular attention to pairs that combine a crypto asset with a tokenized equity, such as SOL with tokenized Bloom Energy (BE) shares, where trading hours, issuer backing and regulation add risks that a crypto-only pair does not carry.
1 · Introduction
Holding two assets is easy. Earning a yield on the pair while you hold it is not. Supplying liquidity to an automated market maker (AMM) is the most direct way to do it: the pool pays you a share of every swap. In exchange, you accept a position whose composition shifts as prices move, and you take on the chore of collecting and redeploying fees.
Splice packages that position as a single token. A holder of sSOL·BE owns a pro-rata claim on one shared SOL/BE pool position, and that position grows as fees are compounded into it. The token can sit in any wallet, move between accounts, or be paired in other pools, without the holder managing the position directly.
This paper is a design proposal. Section 2 reviews the building blocks. Section 3 specifies the mechanism. Section 4 works through the economics, including the case where fees lose to price divergence. Sections 5 and 6 cover the optional collector card and the protocol token. Sections 7 and 8 set out risks and the questions we have not yet answered.
2 · Background
2.1 Constant-product pools
In a constant-product pool holding reserves x of asset A and y of asset B, trades keep x · y = L² fixed apart from fees, where L is the pool's liquidity. The price of A in units of B is P = y / x. Solving for the reserves gives x = L / √P and y = L · √P. A full-range position in a concentrated-liquidity AMM behaves the same way, because its range covers every possible price.
2.2 Why full range
Concentrated positions earn more fees per unit of capital while the price stays inside their range, and earn nothing once it leaves. They also need active management. A fungible token cannot ask every holder how to manage the range, so Splice uses full range: lower fee efficiency, but a position that never goes out of range and never needs a manager.
2.3 Tokenized equities on Solana
Several issuers now offer SPL tokens that track listed shares, backed by shares the issuer holds in custody. These tokens trade around the clock on-chain while the underlying stock trades only during market hours. They are typically unavailable to residents of some jurisdictions, including the United States. Their value depends on the issuer's custody, redemption process and solvency. Splice treats any such token as an ordinary SPL asset, but these properties shape the risk of every pair that contains one (Section 7).
3 · Design
For each supported pair (A, B), the Splice program owns exactly one full-range position in an existing Solana AMM pool, and one SPL mint whose supply S represents shares of that position. Let L be the position's current liquidity.
3.1 Mint
A depositor supplies A and B in the pool's current ratio. The program adds them to the position, increasing liquidity by ΔL, and mints S · ΔL / L shares (or ΔL shares for the first deposit). A single-sided deposit is first swapped through the pool to the correct ratio; that swap pays the pool fee and price impact like any other trade.
3.2 Compound
Fees accrue to the position as unclaimed A and B. The compound instruction is permissionless: any account may call it. It collects the fees, deducts the protocol's share (Section 6), and adds the remainder back as liquidity. Supply is unchanged, so liquidity per share, L / S, rises. Because callers pay transaction costs, the program may pay a small bounty from collected fees so that someone always has a reason to crank it. That bounty is a parameter: [BOUNTY TERMS].
3.3 Redeem
Burning s shares withdraws s / S of the position's liquidity and pays out the corresponding A and B at the current pool price. A redeem calls compound first, so a leaving holder receives their share of fees earned up to that block and cannot skim fees owed to others.
3.4 Ordering and manipulation
Mint and redeem amounts depend on the pool's spot price. An attacker who moves the price inside the same transaction could mint cheaply or redeem richly. The program should therefore compound before every mint and redeem, reject deposits outside a user-set slippage bound, and, for equity pairs, compare spot against an external reference price and pause minting when they diverge beyond [THRESHOLD].
4 · Value and returns
4.1 Value per token
Measured in asset B, the position holds y + P · x = 2L√P. One share is therefore worth
This separates the two things that move the token. The term L / S only increases, through compounding. The term √P follows the price ratio between the two assets, in either direction. "Fee-compounding" describes the first term. It says nothing about the second, and the second usually dominates.
4.2 Divergence loss
Compare holding the position against holding the original deposit untouched. If the price ratio changes by a factor r, the position is worth less than the untouched deposit by
The loss is the same whether A rises against B or falls by the same factor. Values from the formula:
| Price ratio change (r) | Example | Divergence loss |
|---|---|---|
| 1.25× or 0.8× | BE up 25% vs SOL | −0.6% |
| 1.5× or 0.67× | SOL up 50% vs BE | −2.0% |
| 2× or 0.5× | SOL halves vs BE | −5.7% |
| 4× or 0.25× | SOL quadruples vs BE | −20.0% |
SOL and BE have historically moved far less in step than, say, two stablecoins, so large values of r over a holding period are plausible rather than exotic.
4.3 When fees win
Compounded fees raise L / S by roughly the pool's fee rate times the ratio of trading volume to liquidity, after the protocol cut. A holder beats simply holding both assets only when that cumulative growth exceeds IL(r) over the same period. High-volume, low-divergence pairs suit the design. Volatile, uncorrelated pairs with thin volume do not. Any interface for Splice should show both quantities side by side rather than fee yield alone.
5 · Collector cards
On mint, a holder may opt into a collector card: a compressed NFT that records the pair, the mint date and the liquidity-per-share at minting. Its artwork can render the fees compounded since then by reading the live position.
The card is a receipt and an artwork, not a claim. It holds no value from the position, transferring it moves nothing, and burning it changes nothing. Keeping value entirely in the fungible token avoids the problems that arise when an NFT and a fungible balance can drift apart.
6 · The $SPLICE token
The protocol takes [X%] of fees collected at each compound. This section must state exactly where that revenue goes and what, if anything, $SPLICE entitles its holders to. The terms below are placeholders to be replaced with what the deployed contracts actually do.
| Chain | Solana |
|---|---|
| Mint address | 8YwMYAj8iok5J5E68kTcw84xUdHUuS93HZJQvvNpump |
| Total supply | [TOTAL SUPPLY] |
| Protocol fee | [X%] of compounded fees |
| Use of protocol fee | [TREASURY / BUYBACK / OTHER] |
| Allocation | [TEAM %, VESTING, LIQUIDITY %, TREASURY %] |
| Upgrade authority | [WHO CONTROLS IT, OR "REVOKED"] |
Pair tokens work without $SPLICE. If the protocol token's only role is to receive a share of fees, holders should understand that its value depends on volume across all pairs, and that rules on such arrangements differ by jurisdiction.
7 · Risks
Divergence loss. As Section 4 shows, a pair token can lose value relative to holding its two assets, and fees may not make up the difference.
Equity token backing. A tokenized share is only as good as its issuer's custody and redemption. Corporate actions such as splits and dividends are handled by the issuer, and the on-chain token may not reflect them instantly.
Market hours. When the stock market is closed, the on-chain equity price has no live reference. Large weekend moves in SOL are absorbed by the pool against a stale equity price, and arbitrageurs capture the gap when markets reopen at liquidity providers' expense.
Smart-contract risk. The Splice program and the underlying AMM are both code that can fail. Audit status: [AUDITOR AND REPORT LINK, OR "UNAUDITED"].
Secondary-market discount. A pair token can trade below what it redeems for when few people make a market in it. Redemption keeps that gap bounded only if redeeming is cheap and always available.
Regulation. Tokenized equities and fee-sharing tokens are restricted or unclear in many places. Users are responsible for whether they can lawfully hold either.
8 · Open questions
Should equity pairs pause minting and redeeming while the stock market is closed, trading availability for protection against stale prices?
Is full range the right default for every pair, or should correlated pairs (two large-cap tech stocks, for instance) use a wide but bounded range managed by a published rule?
What compound bounty keeps the crank running in quiet periods without eating a material share of fees?
9 · Conclusion
Splice turns an LP position into something that behaves like an ordinary token: fungible, transferable and self-maintaining. The mechanism is simple, and its value lies in removing the chores of liquidity provision rather than in changing its economics. A pair token still carries the full price exposure and divergence loss of the position it wraps. Pairing a crypto asset with a tokenized equity adds issuer, market-hours and regulatory risk on top. We think the design is useful for holders who already want exposure to both sides of a pair and would supply liquidity anyway, and we publish it as a draft for review.
DISCLAIMER
This paper describes a proposed design. It is not an offer to sell or a solicitation to buy any token, security or tokenized security, and nothing in it is financial, legal or tax advice. Parameters marked in brackets are not yet decided. Bloom Energy (BE) is used as an example underlying equity only; Bloom Energy Corporation is not affiliated with, and does not endorse, Splice or $SPLICE. Contract addresses are valid only when published from the author's verified accounts.