World’s 1st Dynamic Market Maker: Automated market making with greater flexibility and extremely high capital efficiency
After months of extensive research, we are very excited to unveil the mainnet beta release of the long-awaited Kyber Dynamic Market Maker (DMM) protocol! Starting from today, any liquidity provider can make optimal use of idle tokens by adding them to Kyber DMM pools, while any taker (e.g. Dapp, aggregator, or end user) can access this liquidity.
Kyber previously established the first liquidity aggregation protocol and on-chain endpoint in DeFi, as well as the KyberPRO framework catered to professional market makers. Kyber DMM is a novel liquidity protocol specially designed for retail liquidity providers and token teams, and is the first of many new protocols that will be launched on the Kyber 3.0 liquidity hub
This launch marks a new era for DeFi, where open, permissionless liquidity contribution is coupled with extremely high capital efficiency and flexibility for the very first time. Advantages of the Kyber DMM include:
- Amplified pools with extremely high, if not the highest capital efficiency possible when compared to AMMs.
- Lower trade slippage due to high capital efficiency.
- Dynamic fees to optimize returns for liquidity providers and reduce the impact of impermanent loss.
- No third-party or centralized oracle risks.
If this is your first time hearing about Kyber DMM, this video will bring you up to speed:
Visit the Kyber DMM beta at dmm.exchange
When developing the Kyber DMM beta, we were inspired by the intuitive and user-friendly interface of the popular AMM Uniswap, so users should find certain operations such as swapping tokens and the protocol analytics page very familiar. However, there are a few important differences that we will highlight below. We also plan to further innovate on the UI in the near future so that it is tailored-made for the new, unique features of Kyber DMM.
For Liquidity Providers
1. Adding Liquidity to an Existing Pool
You can add liquidity by first entering the ‘Pools’ tab before selecting the token pair that you want to add liquidity for. The list of available pools for that pair will be displayed and each pool has important information categorized by Pool, Ratio, Liquidity, Volume, Fee, AMP, 1Y F/L, My Liquidity etc. If there are no available pools for that token pair, you are able to create a new pool.
- Ratio: Current ratio for the token pair in the selected pool. Liquidity providers have to add liquidity according to this ratio. This ratio starts at 5–50 but will change over time as trades are performed through the pool.
- Liquidity: Token inventory available in the pool.
- Volume (24H): 24H Trade volume executed through the selected pool.
- Fee (24H): Fees collected in 24H for liquidity providers from trades executed through the selected pool.
- AMP: Amplification Factor. Higher AMP, higher capital efficiency within a specific price range. This means that given the same liquidity pool and trade size, Kyber DMM can provide much better liquidity and slippage compared to AMMs. Slippage can potentially be 100X better than AMMs for more stable pairs! Higher AMP is recommended for more stable pairs (e.g. USDC/USDT or sETH/ETH), lower AMP for more volatile pairs. AMP=1 pools are basic pools with dynamic fees but no amplification. Pool creators have to set the AMP factor for each pool in advance, and liquidity providers can then choose which pool they want to deposit tokens in based on the AMP.
- 1Y F/L: 1 Year Collected Fees divided by Pool liquidity, based on 24H volume annualised. This metric can also be viewed as the pool’s return on liquidity.
- My Liquidity: If you have added liquidity earlier, it will be shown here.
- Add Liquidity: Click the + button next to the pool of choice to begin adding liquidity to earn dynamic fees. After adding liquidity, you will receive transferrable DMM-LP pool tokens representing your pool share. Fees earned as a liquidity provider can be automatically claimed when you withdraw your liquidity later.
- Migrate Liquidity: There is a simple liquidity migration page if you wish to quickly migrate your liquidity residing in external platforms (e.g. Uniswap, Sushiswap) to the Kyber DMM.
2. Creating a New Pool
Multiple pools with different AMPs can be created for the same token pair. To create a new pool, click Create New Pool. As a pool creator, you can customize your programmable pricing curve with a specific amplification (AMP) factor to create amplified pools that support highly capital-efficient liquidity contributions for any token pair.
The ratio of the tokens you add will set the initial price for this pool, so make sure you add an appropriate ratio of tokens while keeping in mind the market price for the token pair.
Dynamic Fees: Each liquidity pool will support dynamic fees. Fees increase during high market volatility and decrease during low market volatility to encourage trading and volume. Overall, this optimizes potential returns for liquidity providers and bears similarities to how some professional market makers operate to get the most returns out of their trades. The dynamic fee range (dynamic fees given to liquidity providers) will change depending on the AMP used for pool creation.
Active Price Range: This is the active/tradable price range of the token pair in that particular liquidity pool. When you increase the AMP to a factor >1, capital efficiency for the pool increases, but the active/tradable price range will also change and this can be seen on the UI. Do note that if the price goes above or below the range, the pool may become inactive. If the pool has AMP=1, it is a basic pool with dynamic fees but no amplification. Active price range for AMP=1 pools has no limit (0 to infinity).
After different pools are created, additional liquidity providers can then choose which pool they want to deposit tokens into after looking at the AMP and other important details.
Drawing liquidity from its pools, the Kyber DMM allows anyone to swap between tokens on the ‘Swap’ tab. Kyber DMM will automatically go through all the liquidity pools available and find the pool with the best price (that can also support the trade size). It is possible for traders to enjoy lower slippage due to much higher capital efficiency when trades go through amplified pools.
DMM Analytics Page
We have also prepared a protocol analytics and tracker page for users to easily track the available token pairs, present liquidity, trading volume, and other important statistics.
Read about Kyber DMM’s role in Kyber 3.0 here.
Developers can start building on Kyber DMM right away! Any taker can access the liquidity available on the various pools. Due to Kyber DMM’s programmable curves and dynamic fees, liquidity providers automatically enjoy greater flexibility, higher earnings potential, and extremely high capital efficiency not possible in typical AMMs.
We encourage all DeFi wallets, Dapps, aggregators, and end users to integrate the DMM for their liquidity needs given its immediate and potential benefits. Integrating directly with the Kyber DMM instead of the main Kyber Network liquidity endpoint also enables Dapps to potentially save a substantial amount of gas.
Kyber has always maintained a high standard of smart contract security for all of its protocols and initiatives, and its liquidity infrastructure has facilitated close to $5 Billion worth of trading volume for thousands of users since 2018. The new Kyber DMM protocol will likewise enjoy the same level of security and reliability.
The codebase has been reviewed and audited multiple times by both the team and external auditors with no critical issues found. The full audit will be released soon and the codebase remains open source on Github for community developers to review. As an additional safeguard and a sign of our commitment towards security, we will soon run a DMM Bug Bounty Programme.
We are very grateful to our passionate community for their support for the Kyber DMM protocol launch! Please note that the protocol is still in beta and the types and amount of tokens available will still be low at launch. We welcome more feedback to further optimize the UI and operations to ensure a seamless swapping, liquidity contribution, and liquidity sourcing experience. We will also release more information about the Bug Bounty Programme soon.
Everyone in the Kyber community is encouraged to join our governance forum at gov.kyber.org to share their feedback as well as ideas on how to boost liquidity on the Kyber DMM.
Given the Kyber DMM’s enhanced flexibility and capital efficiency, we believe it will soon be a critical liquidity source for a wide variety of DeFi use cases. We look forward to watching the Kyber DMM flourish as a key component of Kyber Network’s path towards being a sustainable liquidity infrastructure for DeFi.