What is a Dynamic AMM Pool?
Last updated
Last updated
Meteora's Dynamic AMM Pools are similar to constant product pools that support token prices from 0 to infinity. LPs on Dynamic AMM Pools earn both swap fees and yield from lending platforms.
The price of your token in a Dynamic AMM (Volatile) Pool is based on the formula: x*y = k
x and y are the quantities of the two tokens in the pool (e.g. JUP and USDC).
k is a constant. As trades occur, the product of the amounts of the two tokens must remain the same.
If someone buys JUP with USDC from your pool, the amount of JUP in your pool decreases, and the amount of USDC increases. The Dynamic AMM Pool adjusts the price based on the new token balances in the pool.
Dynamic AMM Pools have a unique yield infrastructure where pools are built on top of the capital allocation layer.
To the user, Dynamic AMM Pools look similar to standard AMMs that uses the proven SPL-token swap. But underneath the hood, assets in the pools will be deposited directly into the in the yield layer and USDC/SOL/USDT tokens get dynamically allocated to external lending protocols to generate , reducing the reliance on liquidity mining to attract liquidity.
Overreliance on liquidity mining to attract LPs is unsustainable and can cause issues such as token inflation and short-term liquidity when LPs lose interest after the rewards end. Our Dynamic AMM Pools avoid this through effective capital allocation mechanisms of the idle assets to earn yield for the LPs.
This allows LPs to receive yield from a few different places — the lending interest, the liquidity mining rewards collected from the platforms, the AMM trading fees, and Meteora liquidity mining rewards (when available).
Moreover, LPs can choose to permanently lock their liquidity on Dynamic AMM Pool to raise community confidence, while continuing to earn and claim fees from this locked liquidity.
This helps to create a more sustainable and long-term liquidity provision for the ecosystem that prioritizes value creation and attracts committed LPs.
To cater to memecoin launches, (a subset of Dynamic AMM Pools) have a dynamic fee, which ranges from 0.15%-15% and is set by the protocol. This fee may be changed by the protocol over time to optimize for different launches and market conditions. Memecoin Pool LPs also earn lending yield from the locked SOL and USDC liquidity in the pool.