DLMM
The Dynamic Liquidity Market Maker (DLMM) is Bean Exchange’s custom-built architecture for spot trading on Monad. Inspired by systems like Trader Joe's Liquidity Book and Meteora, it is engineered to optimize capital efficiency, execution quality, and LP profitability in a performant and composable DeFi environment.
Design Motivation
The DLMM is motivated by a simple question:
How can we maximize capital efficiency for LPs while delivering low-slippage execution for traders—without requiring active position management?
The answer builds on the evolution of prior AMM models:
Traditional AMMs (e.g., Uniswap v2)
Use the classic x * y = k invariant. Simplicity, passive provisioning, composable with other DeFi protocols.
Inefficient capital use. High slippage. Capital is spread across infinite price range.
Concentrated Liquidity AMMs (e.g., Uniswap v3)
Allocate liquidity within custom price ranges. Improved capital efficiency, tighter spreads.
High complexity. Requires active position management and in
Bean’s DLMM extends these models by offering precision, programmability, and dynamic adaptivity—in a system optimized for Monad’s parallel VM.
Core Components of DLMM
I. Bin-Based Price Segmentation:
Definition: The price curve is divided into discrete, fixed-width price bins.
Function: Each bin acts as a standalone liquidity pool at a single price point.
Execution: Swaps within a bin occur at zero slippage; multi-bin swaps route seamlessly across adjacent bins.
Implication: LPs can target capital with surgical precision, eliminating waste in inactive price zones.
II. Composable Liquidity Shapes
Definition: LPs can distribute liquidity non-uniformly across multiple bins to form custom shapes.
Examples:
Concentrated spike for stable pairs
Asymmetric skew for directional bias
Wide spread for volatile assets
Implication: Enables advanced strategies without the need for external rebalancers or frequent user intervention.
III. Dynamic Fee Adjustment
Definition: Swap fees automatically adjust based on real-time market volatility.
Mechanism:
In high-volatility regimes, fees increase to offset LP risk.
In low-volatility regimes, fees tighten to improve execution and volume.
Implication: Enhances LP returns during riskier periods and incentivizes deeper liquidity during calm conditions.
This allows Bean’s spot market to operate as a high-performance DEX while offering order book-like precision with AMM-level composability.
In the next sections, we’ll explore the three core components of DLMM in details.
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