Guide: Setting Tick Size Optimal Tick Size Minimum Order Size for Your token

Two of the critical parameters when launching a token on Solana are the tick size and the minimum order size. Choosing these parameters properly will directly impact the functionality and success of the token in the marketplace.

Below, I’ll walk you through a guide on how to set these parameters based on the total number of tokens (token ) you plan to issue.

But first, let's go part by part.

What is Tick Size?

The tick size the smallest increment by which token price can be adjusted. This parameter determines the precision with which the token can be traded token the market.

A smaller tick size allows for greater granularity in pricing, which is crucial for tokens with a high value or large supply.

What is Minimum Order Size?

The minimum order size is the minimum number of tokens that can be traded in a single transaction. This parameter is essential to maintain liquidity and ensure that even small transactions are viable without flooding the market with tiny orders.

Relationship between Tick Size and Minimum Order Size

In the table provided by Smithii, there is a constant relationship between tick size and minimum order size expressed as:

There is a numerical relationship that respects the parameters of the table given as:

{Tick Size}*{Minimum Order Size} = 10^{-6}

This relationship ensures that the market maintains a balance between price accuracy and trading accessibility, regardless of token's total supply.

Why Tick Size the Tick Size get smaller as the token supply token ?

First, there is a concept you need to understand and be clear about: the value of token. When we create a liquidity pool, we establish a relationship between a token and a quote token.

The quotation token is usually Solana or USDC. That is the asset that we do not have the possibility to exchange freely because it is the capital that we have.

What we can change completely as we see fit is the tokens we are going to create for that given amount of Solana or USDC.

The more of our token , the lower the value of each token becomes, because the capital backing it will remain the same. In the real economy, the more dollars the U.S. government prints, the less each dollar is worth, since the value backing it has not increased.

Next, we must be very mindful of the units with which both Min Order Size and Tick Size are measured.

The Min Order Size is measured in numbers of tokens. So, if we create high supplies such as 10B or 100B, it is more logical that the amount needed to buy is more tokens so they represent significant capital and possibly eliminate quite a bit of stock from bots.

Tick size is measured on Solana, and this is what is really important. If we create a token with a high supply, i.e. each token is worth little, a high tick size on Solana will cause price jumps.

Managing Tick Size Minimum Order Size Based on Token Supply

Below I will show you how to handle these parameters in each case. You can also consult our post to create a successful tokenomics.

Tick size and Min Order Size Low Supply Tokens (Up to 1M Tokens)

For tokens with a supply of up to 1 million, it is important to have a tick size allows for sufficient precision given the potentially high value of each token, and a minimum order size that ensures accessibility.

Example:

Step 1: Determine the Token


Let’s assume you decide to issue a token a total supply of 500,000 (500K) tokens.


Step 2: Set the Minimum Order Size


To maintain market accessibility and functionality, you decide that the minimum order size will be 0.05 tokens. This allows users to buy and sell small fractions of the token.


Step 3: Calculate the Tick Size


To calculate the tick size, use this formula:


Tick Size (10^-6) / Minimum Order Size


Given a Minimum Order Size of 0.05 tokens:


Tick Size (10^-6) / 0.05 = 0.00002

For a supply of 500,000 tokens, with a minimum order size of 0.05 tokens, the tick size be 0.00002. This ensures that the token price quote token sufficiently accurate and that transactions are affordable.

Tick size and Min Order Size for Medium Supply tokens (Between 1M and 100M Tokens)

For a moderate supply, a balance between granularity and order size is required. As the supply increases, the value of each individual token , but pricing accuracy is still necessary.

Example:

Step 1: Determine the Token

Let’s assume you decide to issue a token a total supply of 5 million (5M) tokens.

Step 2: Set the Minimum Order Size

To maintain market accessibility and functionality, you decide that the minimum order size will be 0.5 tokens. This allows users to participate in the market without needing to buy or sell large amounts.

Step 3: Calculate the Tick Size

To calculate the tick size, use this formula:

Tick Size = (10^-6) / Minimum Order Size

Given a Minimum Order Size of 0.5 tokens:

Tick Size = (10^-6) / 0.5 = 0.000002

For a supply of 5 million tokens, with a minimum order size of 0.5 tokens, the tick size be 0.000002. This ensures that the token price quote token sufficiently accurate and that transactions are affordable.

Tick size and Min Order Size High Supply Tokens (Over 100M Tokens)

For tokens with a very high supply, it is crucial to have an extremely small tick size to allow for any significant price differentiation and a larger minimum order size to maintain market efficiency.

Examples:

Step 1: Determine the Token

Let’s assume you decide to issue a token a total supply of 2 billion (2B) tokens.

Step 2: Set the Minimum Order Size

To maintain market accessibility and functionality, you decide that the minimum order size will be 200 tokens. This ensures that transactions are large enough to be meaningful.

Step 3: Calculate the Tick Size

To calculate the tick size, use this formula:

Tick Size = (10^-6) / Minimum Order Size

Given a Minimum Order Size of 200 tokens:

Tick Size = (10^-6) / 200 = 0.000000005

For a supply of 2 billion tokens, with a minimum order size of 200 tokens, the tick size be 0.000000005. This ensures that the token price quote token sufficiently accurate and that transactions are affordable.

Conclusions

A high tick size problems when trading your token large price fluctuations. To calculate this ratio correctly, tick size should use the formula {Tick Size}*{Minimum Order Size} = 10^{-6} to determine the appropriate value for your specific token.

If you have a supply like the ones in the table at Smithii, you can base it on what is there.