Dynamic AMM Overview

Meteora's Dynamic AMM Pools are constant product pools that support token prices from 0 to infinity, and they 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 Dynamic Vaults in the yield layer and USDC/SOL/USDT tokens get dynamically allocated to external lending protocols to generate yield and rewards, 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 fees from their liquidity.

This helps to create a more sustainable and long-term liquidity provision for the ecosystem that prioritizes value creation and attracts committed LPs.