A new trend in Liquidity is quietly changing the game rules of Solana Decentralized Finance.

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

Written by: 0xResearcher

Recently, after attending the TOKEN2049 conference in Singapore, I had a particularly strong feeling: in the DeFi circle, the longstanding topic of "liquidity" is undergoing a new technological upgrade. Many projects in the Solana ecosystem have clearly put a lot of effort into liquidity management, especially when dynamic liquidity management (DLMM) is mentioned, everyone's eyes light up.

It’s actually quite easy to understand. In the past six months, the DeFi activity on the Solana chain has skyrocketed, with a continuous emergence of on-chain meme coins and a rebound in TVL, making it seem prosperous. However, upon closer inspection, new problems have arisen: with more projects, liquidity has become dispersed, leading to insufficient depth in many trading pairs and high slippage, which has affected the user experience, and the earnings for LPs (Liquidity Providers) have also become increasingly competitive.

And this just provides a stage for new technologies like DLMM.

Dynamic Liquidity: A New Weapon for Decentralized Finance

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

In the past, LPs had to manually adjust the range to provide liquidity, which was quite cumbersome; however, DLMM achieves dynamic automatic adjustment, intelligently allocating funds based on market conditions, making it easier and more worry-free for LPs.

Its advantages are actually very intuitive:

• Automatically counteract market fluctuations, not afraid of sharp price surges or crashes.
• Improve the utilization rate of funds, so that every penny is "online work"
• Reduce trading slippage for a smoother user experience.

At TOKEN2049, many project teams were discussing DLMM, and some even joked, "In the future of Solana DeFi, it would be embarrassing to issue tokens without DLMM."

Why Does the Solana Ecosystem Urgently Need This Upgrade?

In plain terms, Solana now has a lot of people, and there's not enough money.

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

At this time, the dynamic adjustment mechanism of DLMM is like adding an "AI driver" to the liquidity market.

It allows funds to automatically "run" and always stay concentrated in active market areas, not wasting or idling, helping the overall DeFi ecosystem "recover".

How DLMM Changes the Trading Experience?

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

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

• User trading slippage has decreased, especially the experience is smoother on certain Meme pairs.
• LP earnings have increased due to a significant rise in capital utilization.
• Liquidity concentration has increased, and new projects can 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 solve the liquidity fragmentation issue in the Solana ecosystem.

From a soft perspective, this is actually an upgrade plan for DeFi infrastructure, and DLMM is its core engine.

The next opportunity in DeFi may be hidden in "liquidity".

From the trends of the conference, on-chain data to the actual user experience, it can be seen that:

• Dynamic Liquidity Management
• Liquidity as a Service (LaaS)
• Improvement of capital efficiency

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

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