Meteora’s trading volume has been increasing by leaps and bounds and we are now consistently a Top 3 liquidity source for the Jupiter aggregator in terms of 24H volume. The community discussed our next aim — to climb to Top 2 and what it would take to get there. As our LP army starts marching into March, we plan to embark on a massive push in volume. We can then use that momentum to form the MET DAO to vote on the stimulus proposals that would help sustain our growth and take us to even greater heights.
Growth Initiatives for the LP Army
Apart from our ongoing participation in the Solana Scribes content hackathon (submit DLMM educational content to win prizes!), the community discussed other growth initiatives to expand our LP army.
Sash DEDLMM stated that users would ultimately choose the best product according to their needs, so he would rather Meteora focus on improving core products like DLMM so that it becomes so useful that it would be impossible to ignore.
Others like Digitaldan felt that many users without a financial background may not even fully comprehend some of the basic DeFi concepts like providing liquidity and on-chain DEX trading. Thus they may not have the ability to discern which is in fact the “best product” for them. We would need to first break down these concepts and give them more confidence to start LPing on Meteora.
Kikashi suggested that we identify and build upon strong narratives to increase brand awareness for Meteora, spread our LP culture, and attract users. For example, the “LP army” narrative could be galvanized through exciting professional-grade videos that educate users about DLMM and its multiple benefits for LPs. Fuzzy (Lawrence) kindly shared that we can reach out to SuperteamDAO to discuss such educational initiatives to engage a larger audience!
On that note, Thanos from Keyrock warned that we should be wary of the type of content published in our marketing material. Ideally, the focus should be on the facts and fundamental benefits and not mislead users by shilling exorbitant returns and yield like what some projects do, since LPing on DLMM is actually not that straightforward.
The team hopes to channel all these great ideas into more educational and liquidity growth initiatives. If you have ideas, please propose them in discord or on our governance forum under the Let’s Grow Met section.
DLMM strategy sessions with Pro LPs
Meteora ❤️ LPs and the DLMM was designed to help LPs earn more fees. Naturally, we want to talk to more LPs to better understand their needs and optimize our product accordingly.
One of the ways we’re doing this is through our new weekly DLMM strategy sessions to help LPs level up their skills. The first session was hosted by Kash, sherpa of SuperteamDAO, and featured Thanos from Keyrock as the market making expert fielding questions from the community.
Kikashi asked Thanos and Ben some of the most pressing questions, such as how to ensure effective risk management and how to mitigate the impact of impermanent loss (IL) while using DLMM. Takeaways from our community call and the DLMM strategy session include how new LPs can start testing on pools with a high bin step first while setting a wide range with the Spot volatility strategy. LPs should also actively monitor their token balances and value and keep a periodic record of the impact from price changes and their rebalancing, so as to pinpoint what they need to tweak in their strategy to improve the chances of profitability.
Watch the strategy session recording here:
Turning on Protocol fees
Protocol fees would eventually need to be turned on to ensure sustainable growth for Meteora. Like Chris S mentioned, protocol fees can help offset Meteora’s infrastructure, operational, and manpower costs.
The team sought community feedback regarding our initial proposal to turn on protocol fees at 10%, only for liquidity pools with trading fees of 1% (100 bps) and higher. The idea was to curb the potential abuse of exotic and volatile pairs to earn MET points, while not impacting our high volume or stablecoin pools, especially the SOL-USDC pools.
For example, in a DLMM pool with 1% base fee, instead of earning the full 1%, LPs would get 0.9% and the protocol would get 0.1%. This change do not appear to directly result in a price impact for traders (since the total base fee % is still the same) and our low fee and high volume pools would still enjoy 0 protocol fees.
There were a few concerns raised by the community. The first was whether LPs might be turned off by the act of turning on protocol fees and end up moving capital to alternative platforms. Kikashi didn’t agree that we need to be overly worried about this, as our proposed setup is similar to what some DEXes are already doing, thus we have a market benchmark as reference.
Otto and Thanos from Keyrock preferred that we conduct more research and experiment with A/B testing on a small number of pools prior to making a protocol-wide decision. Although Otto generally agreed with a 10% protocol fee for 1% fee and above pools, he would like to see more information regarding the impact of toxic MEV flow (e.g. sandwich attacks, front-running) on Solana, given that it has been considered a sore point on Ethereum.
Thanos was concerned about how protocol fees might negatively impact liquidity on Meteora to an extent that we are unprepared for. He cited the findings from a Uniswap/Gauntlet report; that applying a 10% protocol fee would lead to a >10% loss in liquidity and a ~0.75% drop in core trading volume. However, he noted that this report was focused on swap transactions on Ethereum mainnet, and may not be that applicable to Solana, which has faster and cheaper transactions and other technical differences.
Overall, community members in the call were in favor of an incremental approach to the protocol fee switch, so that we can observe the impact on a few selected pools in a controlled environment before determining our next steps.
MET DAO: Basic setup and what to expect
We are currently tracking MET points for TVL and fees earned on DLMM, dynamic, and multi-token pools using this scoring system. However, the MET DAO still needs to be formed to officially vote on and unlock the 2% DAO Expert Stimulus and 10% LP Stimulus packages (% here referring to the MET initial supply) to allocate MET to point holders. In March, we will initiate a greater push in volume as much as possible and form the MET DAO on the back of that positive growth.
When the DAO is formed, instead of releasing the official MET token, we plan to first distribute a locked placeholder token (name to be determined) to initial stakeholders based on the Feb 2023 MER snapshot. This placeholder token represents the stakeholders’ future MET allocation, while allowing them to immediately vote and participate in governance.
Using a placeholder token instead of minting the official MET token right away helps the MET DAO move forward faster as there are much less operational barriers and security concerns involved. In addition, this allows the team to set up a more impactful MET token launch on Jupiter’s LFG launchpad later, plus enjoy all the associated attention and benefits from that massive event. A possible scenario would be following JUP’s lead and airdropping MET for point holders to claim while raising funds for MET at the same time. The community appeared to be generally on board with this, with C2yptic commenting that this was a refreshing approach.
Other community requests
We also took some time to listen to other proposals and feature requests to make Meteora better.
Currently, LPs who do not want to actively manage their liquidity have the option to simply deposit to Kamino vaults (and earn MET points + Kamino points!). But the community also wanted improvements to allow LPs to easily create and manage their DLMM liquidity positions directly on Meteora. Some users were keen to prepare for upcoming Jupiter LFG launches and requested for an easier way to set up single-sided liquidity to take advantage of DLMM’s features to “snipe” the new token and LP profitably.
To address the above, UI upgrades are underway to group DLMM pools with the same token pair (but different base fees and bin steps) together. We are also making DLMM pool creation permissionless on the UI so users can create pools with their preferred parameters without the team’s assistance.
Another interesting idea raised was to use the DLMM SDK or other tooling to develop a market making bot to automate the proactive rebalancing of DLMM liquidity positions, which can be a tedious process when done frequently and manually. If anyone is already making such a bot or would like to contribute to this project, let us know!
Graceb also had some ideas to enhance Meteora’s UI. For instance:
- Adding filters to make it easier to find pools
- Adding more tooltips to explain acronyms and labels in layman terms
- Cleaner font colours and sizes; making it easier to spot the most important metrics
- For DLMM: adding total 24H and cumulative fees accrued by LPs
If you have more product feature requests, feel free to propose them in our governance forum under the Product Requests section.
Thank you Sash DEDLMM, Digitaldan, Kikashi, Thanos | Keyrock, Chris S, Otto, C2yptic, Graceb, ~alchemist, carrium.sol, Durden, Kash, and others for your contributions in the call and the first DLMM strategy session!
