Perhaps in the future, DLMM will become the "standard configuration" for all DeFi projects, just like Uniswap V3 did back in the day.

Written by: 0xResearcher

After recently attending the TOKEN2049 conference in Singapore, I had a particularly strong feeling: the topic of "liquidity," which has been a long-standing discussion in the DeFi circle, is undergoing a new technological upgrade. Many projects in the Solana ecosystem are clearly putting significant effort into liquidity management, especially when it comes to Dynamic Liquidity Market Making (DLMM), which lights up everyone's eyes.

This is actually understandable. Over the past six months, the activity of DeFi on the Solana chain has skyrocketed, with a plethora of on-chain meme coins emerging and TVL rebounding, creating a vibrant atmosphere. However, upon closer inspection, new problems have arisen: with more projects, liquidity has become dispersed, leading to insufficient depth and high slippage for many trading pairs, which diminishes user experience and increasingly compresses LP (liquidity provider) earnings.

This situation provides a stage for new technologies like DLMM.

Dynamic Liquidity: A New Weapon for DeFi

In simple terms, DLMM (Dynamic Liquidity Market Making) takes a step forward based on the concentrated liquidity of Uniswap V3.

Previously, LPs had to manually adjust their ranges to provide liquidity, which was cumbersome; DLMM automates this process, dynamically adjusting and intelligently allocating funds based on market conditions, making it easier and more convenient for LPs.

Its advantages are quite intuitive:

• Automatically counteracts market volatility, unaffected by sharp price swings
• Increases capital efficiency, ensuring every penny is "working online"
• Reduces trading slippage, providing a smoother user experience

At TOKEN2049, many project teams discussed DLMM, with some jokingly saying, "In the future, if Solana DeFi doesn't have DLMM, it would be embarrassing to launch a token."

Why Does the Solana Ecosystem Urgently Need This Upgrade?

In simple terms, Solana now has a lot of people, but not enough capital.

Although on-chain TVL has rebounded, the explosive growth of projects has led to dispersed liquidity; especially for new projects, they are often criticized for "high slippage and shallow depth" right after launch. For established DeFi projects, if capital efficiency cannot be improved, LP earnings will not attract new users.

At this time, a dynamic adjustment mechanism like DLMM acts like "AI driving" for the liquidity market.

It allows funds to automatically "position themselves," always concentrating in active market areas, avoiding waste and idleness, helping the overall DeFi ecosystem "recover."

How Does DLMM Change the Trading Experience?

Taking a well-known project on the Solana chain, Saros, as an example, they recently launched the DLMM mechanism, and the results have been quite remarkable.

From what I understand, Saros has achieved several things through DLMM:

• User trading slippage has decreased, especially providing a smoother experience for certain meme coin pairs
• LP earnings have increased due to significantly higher capital utilization
• Liquidity concentration has strengthened, allowing new projects to quickly provide depth upon launch

During TOKEN2049, the Saros team also mentioned that they plan to open the DLMM model to more projects, providing "liquidity as a service" (LaaS) to help the Solana ecosystem address the issue of dispersed liquidity.

From a soft perspective, this is essentially an upgrade plan for DeFi infrastructure, with DLMM being its core engine.

The Next Windfall in DeFi May Lie in "Liquidity"

From the trends observed at the conference, on-chain data, and actual user experiences, it is evident that:

• Dynamic liquidity management
• Liquidity as a service (LaaS)
• Improved capital efficiency

These are quietly becoming the key engines for the next round of growth in Solana and the entire DeFi market.

Perhaps in the future, DLMM will become the "standard configuration" for all DeFi projects, just like Uniswap V3 did back in the day. And whoever can make the best use of this new weapon may also gain an early advantage in this recovery cycle.

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