A new trend in liquidity is quietly changing the rules of the game for Solana DeFi
In the past six months, the activity of DeFi on the Solana chain has soared, with a plethora of on-chain meme coins emerging and TVL rebounding, seemingly thriving. However, upon closer inspection, new problems have arisen: with more projects, liquidity has become dispersed, many trading pairs have insufficient depth and high slippage, leading to a compromised user experience, and the returns for LPs (liquidity providers) are becoming increasingly competitive.Recently, after attending the TOKEN2049 conference in Singapore, I had a particularly strong feeling: in the DeFi circle, the often-discussed topic of "liquidity" 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 makes everyone’s eyes light up.
This is actually understandable. Over the past six months, the activity of DeFi on the Solana chain has skyrocketed, with an endless stream of on-chain Meme coins and a rebound in TVL, making it seem vibrant. However, upon closer inspection, new problems have emerged: with more projects, liquidity has become dispersed, leading to insufficient depth and high slippage in many trading pairs, which diminishes user experience and increasingly compresses LP (liquidity provider) profits.
This, in turn, 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 according to market conditions and intelligently allocating funds, making it easier and more convenient for LPs.
Its advantages are quite intuitive:
Automatically counteracts market fluctuations, not afraid of sharp price swings
Increases capital efficiency, making every penny "work online"
Reduces trading slippage, providing a smoother user experience
At TOKEN2049, many project teams were discussing DLMM, with some jokingly saying, "In the future Solana DeFi, it would be embarrassing to launch a token without DLMM."
Why Does the Solana Ecosystem Urgently Need This Upgrade?
Simply put, Solana now has a lot of people, but not enough money to use.
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 for "high slippage and shallow depth" right after launch. For established DeFi projects, if capital efficiency cannot be improved, LP profits 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 on certain Meme coin pairs
LP profits have increased, as capital utilization has significantly improved
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 softer perspective, this is essentially an upgrade plan for DeFi infrastructure, with DLMM being its core engine.
The Next Trend in DeFi May Lie in "Liquidity"
From the trends at the conference, on-chain data, to actual user experiences, it can be seen 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 a "standard configuration" for all DeFi projects, just like Uniswap V3 did in its time. And whoever can make the best use of this new weapon first may also gain an advantage in this recovery cycle.
