SILS: Strategic Influence on Liquidity Stability and Whale Detection in Concentrated-Liquidity DEXs

TL;DR

SILS introduces a dynamic, impact-focused framework for identifying influential liquidity providers in concentrated-liquidity DEXs, improving risk analysis and market stability understanding beyond traditional static measures.

Contribution

The paper presents a novel impact-based approach using on-chain data and anomaly detection to accurately identify high-impact LPs and assess their systemic importance.

Findings

More accurate identification of impactful LPs

Enhanced understanding of liquidity stability impacts

Reduction of false positives and negatives in LP classification

Abstract

Traditional methods for identifying impactful liquidity providers (LPs) in Concentrated Liquidity Market Makers (CLMMs) rely on broad measures, such as nominal capital size or surface-level activity, which often lead to inaccurate risk analysis. The SILS framework offers a significantly more detailed approach, characterizing LPs not just as capital holders but as dynamic systemic agents whose actions directly impact market stability. This represents a fundamental paradigm shift from the static, volume-based analysis to a dynamic, impact-focused understanding. This advanced approach uses on-chain event logs and smart contract execution traces to compute Exponential Time-Weighted Liquidity (ETWL) profiles and apply unsupervised anomaly detection. Most importantly, it defines an LP's functional importance through the Liquidity Stability Impact Score (LSIS), a counterfactual metric that measures the potential degradation of the market if the LP withdraws. This combined approach provides a more detailed and realistic characterization of an LP's impact, moving beyond the binary and often misleading classifications used by existing methods. This impact-focused and comprehensive approach enables SILS to accurately identify high-impact LPs-including those missed by traditional methods and supports essential applications like a protective oracle layer and actionable trader signals, thereby significantly enhancing DeFi ecosystem. The framework provides unprecedented transparency into the underlying liquidity structure and associated risks, effectively reducing the common false positives and uncovering critical false negatives found in traditional models. Therefore, SILS provides an effective mechanism for proactive risk management, transforming how DeFi protocols safeguard their ecosystems against asymmetric liquidity behavior.