> For the complete documentation index, see [llms.txt](https://docs.bean.exchange/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.bean.exchange/spot-market/dlmm.md).

# 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:

| Model                                              | Key Benefit                                                                                                    | Limitation                                                                             |
| -------------------------------------------------- | -------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------- |
| **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.