Protocol Description

Core Mechanism: Hybrid AMM Design

DAMM implements the constant-product formula (x·y=k) enhanced with concentrated liquidity features:

  • x: Token A reserves

  • y: Token B reserves

  • k: Invariant constant (preserved post-swap, excluding fees)

Unlike traditional AMMs, DAMM enables concentrated liquidity within the constant-product framework. Pool creators define immutable price ranges at initialization, concentrating capital within specific bands for enhanced efficiency—combining AMM simplicity with CLMM capital optimization.

Technical Implementation

Price Range Parameters: Creator-defined min/max boundaries restrict trading within specified bands, reducing slippage and maximizing capital utilization.

Liquidity Mechanics: LPs deposit proportionally to current pool price within ranges. Single-sided deposits supported for simplified launches.

Invariant Management: Maintains x·y=k while adjusting effective liquidity based on price boundaries—creating hybrid AMM/CLMM behavior.

Fee Architecture

DAMM implements multi-layered fees without auto-compounding, enabling flexible claiming in single or dual tokens.

Base Fee

Fixed percentage set at initialization (e.g., 0.3%). Applied uniformly to all swaps as input percentage.

Dynamic Fee

Volatility-responsive component adding up to 20% of base fee (expanding to 100%). Calculated on-chain using price movement metrics similar to DLMM's Volatility Accumulator.

Example: 0.3% base + 0.06% dynamic (20% of base) = 0.36% total

Anti-Sniper Scheduler

Protects launches through time-decaying fees:

Linear Decay:

// formular Linear

Exponential Decay:Where:

  • F(t): Current fee

  • F_init: Initial fee (up to 80% for memecoins)

  • F_final: Target fee (e.g., 0.3%)

  • T: Decay duration

  • λ: Decay constant

Fees can decay based on Unix timestamps or blockchain slots, starting high (e.g., 50%) and normalizing over predetermined periods.

Swap Execution

Process Flow

  1. Input Submission: User specifies input amount, output token, slippage tolerance

  2. Fee Computation: Total fee = base + dynamic + scheduler (if active)

  3. Price Calculation:

    • Current price: P = y/x

    • Output amount: [formular]

  4. Range Validation: Rejects or partially executes if price exits boundaries

  5. Reserve Update:

    • x_new = x + Δx

    • y_new = y - Δy

    • Maintains invariant: x_new · y_new = k

  6. Fee Distribution: Accumulated for LP claims

  7. Output Delivery: User receives Δy tokens

Liquidity Management

Adding Liquidity

Standard Process:

  • Execute add_liquidity with token amounts

  • Single-sided deposits auto-calculate equivalent ratios

  • Receive position NFT representing pool share

  • Cost: ~0.022 SUI deployment fee

Range Constraints: Deposits must align with pool boundaries. Out-of-range prices may restrict single-sided entries.

Withdrawing Liquidity

Withdrawal Mechanics:

  • Call remove_liquidity with position details

  • Receive proportional token shares based on current reserves

  • Claim fees separately or during withdrawal

Lock Mechanisms:

  • Permanent locks create tradeable NFTs

  • Vesting schedules enable gradual unlocking

  • Locked positions maintain fee claiming rights

Advanced Features

Position NFTs

  • Permanent Locks: Immutable liquidity generating tradeable fee-earning NFTs

  • Governance Integration: NFTs usable in staking/voting systems

  • Fee Tokenization: Separate fee rights from principal liquidity

Single-Sided Initialization

  • Launch Optimization: Deploy pools with single token (e.g., 100,000 PROJECT tokens)

  • Price Bootstrapping: Market determines paired token accumulation

  • Risk Consideration: Elevated impermanent loss during price discovery

Scheduled Activation

  • Timestamp Control: Unix-based pool activation timing

  • Slot-Based Alternative: Blockchain height activation

  • Coordinated Launches: Ensures synchronized pool opening

Implementation Efficiency

DAMM achieves ~90% cost reduction versus traditional CLMM deployments while maintaining advanced features. The hybrid architecture balances sophisticated liquidity management with operational simplicity, creating optimal infrastructure for both institutional and retail participants in volatile markets.

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