Differences between DLMM and Dynamic Pools

DLMM Pools

DLMM pools enable LPs to earn much more fees with their capital due to precise liquidity concentration with 0-slippage bins, flexible volatility strategies, and dynamic fees.

The liquidity of an asset pair is organized into discrete price bins. Reserves deposited in a liquidity bin are made available for exchange at the price defined for that particular bin, ensuring 0-slippage swaps within each bin. Asset pair market is established by aggregating all the discrete liquidity bins.

LPs have the flexibility to select their volatility strategy and adjust the price range to concentrate liquidity based on their preferences - helping them achieve higher capital efficiency.

In addition, DLMM allows for single-sided asset deposits, so LPs can deposit only one token in the pool to DCA (dollar cost average) to the other token in the pair. Single-sided asset deposits are also suited for token launches, where the project only deposits their token in the pool first so users can purchase their token with USDC or SOL when the pool starts trading.

LPs also earn dynamic fees that are designed to capture more value from market volatility.

Although DLMM LPs can potentially generate a lot more volume and fees, a DLMM pool can become "inactive" and stop earning fees whenever the active price goes out of the range set by the LP. As such, DLMM pools require more active management compared to dynamic pools.

DLMM pools also don't provide LP tokens upon adding liquidity, so projects cannot lock their liquidity permanently (unlike dynamic pools).

Any user can create a new DLMM pool here.

Dynamic Pools

Dynamic pools are pools with a constant product AMM (automated market maker) model that are relatively more straightforward to use for LPs. Unlike DLMM, dynamic pools have a fixed fee %, do not allow LPs to concentrate liquidity, and operate across the full price range so they won't become inactive. Therefore, dynamic pools do not require active management and rebalancing from LPs.

Assets in dynamic pools are also deposited directly into the vaults in the yield layer, so SOL/USDC/USDT assets will be dynamically allocated to external lending protocols to generate yield and rewards for LPs. LPs can receive yield from a few places — the AMM trading fees, the SOL/USDC/USDT lending interest, and any liquidity mining rewards collected from the platforms.

Creating a new dynamic pool is permissionless, meaning any user or developer can create a new pool without approval from the Meteora team.

In addition, with dynamic pools, memecoin creators have the option to "burn" their liquidity by permanently locking the Meteora LP tokens (which represent the liquidity in a dynamic pool). Memecoin creators can compound and claim fees on permanently locked liquidity forever, even though they no longer have access to that liquidity. Memecoin creators can consider launching their memecoin with a Memecoin Pool, which is a subset of dynamic pools and has features specially catered to memecoin launches.