The following topics were covered in our community call:
1. State of Meteora post JUP launch
2. Roadmap for the month
3. Suitable approaches to liquidity pool fees
1. State of Meteora post JUP launch
The community felt that the JUP launch was generally a success despite some minor hiccups. It showcased DLMM’s ability to power a brand new token launch model with the potential to open up incredible opportunities for Solana projects. The JUP launch is a good testament to how projects can use DLMM to transparently democratize the acquisition and trading of their token at launch as opposed to typical setups that often have unclear mechanics that favour bots and put most retail traders at a big disadvantage.
Some interesting learnings
- Meteora users were able to set up single-sided DLMM pools in advance to get JUP at their preferred price and earn fees.
- We iterated upon the first launch for WEN to make positive changes for the JUP launch, such as optimizing the DLMM curve used and adding more mechanisms to help create a level playing field for retail traders.
- Each token launch would likely be quite different because projects have the flexibility to design the DLMM curve and mechanisms to suit their different objectives and requirements.
- We witnessed TVL shifting from dynamic pools to DLMM as more LPs started getting familiar with active LPing on DLMM and the strategies involved.
- The bulk of Meteora volume used to come from dynamic pools. But after the JUP launch, DLMM went from averaging $20M in 24H volume to $88M! At its peak, DLMM reached ~$408M in 24H volume during the JUP launch, even excluding volume from dynamic pools. These numbers are really promising given that trading volume usually drops substantially post token launch.
With its precise liquidity concentration and dynamic fees, and the ability to customize the design of launches to meet project goals, DLMM is going to be a core part of the Jupiter LFG Launchpad and help bootstrap liquidity for top Solana projects. After every launch, we can create many pools with different token pairings, fee tiers, and bin steps, so we can expect an explosion of liquidity pools. This is a fantastic vector of growth for Meteora!
Meteora has achieved solid progress so far and we are in excellent shape fundamentals, product, and community-wise.
2. Roadmap for the month
Reopening requests for DLMM pools
New DLMM pool creations were paused previously during the JUP launch period as there was a huge influx of pool and farm requests. We wanted to first make sure that Meteora is fast enough to accommodate pool creation and ensure a better LP experience, so improvements to the product had to be made to allow for scalability. We have since started fielding requests for DLMM pools and farms again! If you’re keen, just #open-a-ticket in our Meteora discord
The aim is to eventually make DLMM permissionless, so anyone can create any pool of their choice, anytime.
Increasing the maximum number of bins for DLMM
Another improvement the team is actively working on is increasing the 69 bins limitation for DLMM pools, which has been highly requested by LPs. With a higher maximum number of bins, LPs would be able to set a wide price range that increases the likelihood of the position being active while still having a smaller bin step that facilitates higher volume and fees. This would level up the ability for Meteora LPs to earn more fees and also make integrations such as the DLMM-powered Kamino vaults much more powerful.
MET Points Dashboard
MET points went live on 31 January with the JUP launch, and LPs have begun collecting points from their TVL and fees earned. A MET points hub on the Meteora site will be launched soon so that LPs can track their points easily while identifying the best opportunities to earn points. We are trying our best to push it out asap and also fix the issues on the UI where fees earned are not updating fast enough. In addition, we plan to release a points API for the community as an alternative method to track how TVL and fees translate to points. MET points will lead to MET tokens (conversion rate TBD by the DAO and community) in the future after the MET liquidity event.
Forming the MET DAO
After the JUP launch, the team now has more capacity to start our MET DAO preparations. The MET DAO will not be using external sites like Realms. We have forked Tribeca and will host it on the Meteora UI itself.
To kick off the DAO, ve-locked MET (vote escrowed MET) will soon be distributed to MER stakeholders as per the Feb 2023 snapshot to give early stakeholders governance voting power. The veMET will be locked for 1 year. Once formed, MET DAO will begin voting on proposals that the community has discussed for the past few months, such as:
- Future plans for the MET points system (as part of the 10% LP Stimulus Package)
- 2% DAO Experts Proposal
- Turning on protocol fees
The end goal is to have MET in the hands of a thriving community to democratize ownership of Meteora and for the Meteora team to just be part of the DAO. Our community calls and discussions are all part of the foundation work to make this happen.
Integrations on token analytics sites
Meteora pools were previously only tracked on Birdeye, but have since been integrated by DEX Screener, DEXtools, and Sonar.watch! We are currently in touch with CoinGecko and CoinMarketCap as well. It is important for liquidity on Meteora’s DLMM and dynamic pools to be tracked on more such tools, as many users and bots rely on these tools to identify potential trading opportunities, which could lead to more volume and fees for the pools and LPs.
3. Suitable approaches to liquidity pool fees
The main topic discussed in our community call was around the right strategy for setting pool fees on Meteora, considering the pros and cons of higher/lower fees in the increasingly competitive DEX landscape.
For most DEXes or liquidity protocols, there is a % fee charged for trades happening within each liquidity pool, and these fees go to liquidity providers who deposit tokens into the pool.
- Higher fee %: Helps LPs earn more on each trade and compensates them for their risk, but this makes the token swap rate higher, which could deter traders and trading bots from making more swaps and lead to lower volume over time.
- Lower fee %: Could make swaps more competitive and attract more traders and trading bots, increasing volume over time. But this would be at the cost of more earnings for LPs on each trade.
It is clear that a delicate balance is required for Meteora when setting liquidity pool fees in order to achieve the optimal volume and fees to attract and retain more LPs and traders.
Recently, the community has noticed that a subtle trend has been brewing on Solana, with certain pool creators/LPs starting to substantially lower fees for new popular pools. For example, setting very low fees like 1 bps (0.01%) fees is usually reserved for stablecoin pools (e.g. USDC/USDT), but we are now seeing similarly low fees even for volatile mainstream pairs such as SOL/USDC, which naturally brings plenty of trading volume. However, LPs might not be earning enough fees from the volume to offset IL (impermanent loss) risk.
In light of this observation, what should Meteora’s liquidity pool fee strategy be moving forward?
Capture volume by setting lower fees?
Community members such as AD felt that Meteora would need to adapt to the DEX market rate and charge low fees for most pools to stay competitive and attract trades. Jgillz also felt that low fees among DEXes would grow the pie and improve the overall liquidity and user experience on Solana. If users can trade what they want when they want and with low pool fees (and low tx fees as well), that would bring more users to Solana. C2yptic also pointed out that high trading volume from low fees could help Meteora capture more LP attention.
Low fees unsustainable?
However, others such as Durden and Sash is DED felt that perpetually lowering fees is not sustainable. It might bring a lot of volume to Meteora initially, but in a race to the bottom LPs will realize they are earning much less over time and inadequately compensated for their risks (e.g. impermanent loss, depeg, smart contract). This would in turn hinder liquidity growth, which would eventually lead to slippage levels that are detrimental to traders.
Focus on innovation and differentiation?
Otto, rezcpu, and Beaver felt that we do not necessarily need to compete by lowering fees. Instead, we can find a competitive advantage through other means such as product innovation and partnerships. Specifically, Chadwick suggested we concentrate on making DLMM better, since it has unique features such as dynamic fees and zero slippage bins which are not found in other DEXes and can give Meteora that critical edge.
We should not forget that not only do we have a great product, we have yet to launch the MET token, so we do have incentives to utilize to attract LPs. Another growth lever we possess is our dynamic vaults (which are also integrated into dynamic pools), with only ~30–40% deployed for lending yield at the moment. We could potentially deploy more capital for lending yield and funnel it back to LPs to mitigate the impact of IL. Long-term, this could be useful to keep token emissions sustainable.
Shifting the narrative?
Lastly, should we perhaps try to shift the narrative such that there is no such thing as a “Number 1 DEX” for all LPs? Instead, it can be argued that there are a few very strong DEXes with unique offerings that cater to different types of LPs.
It is evident that there is no straightforward solution to this problem at the moment and it would likely require a combination of different strategies to achieve our objectives. For instance, we could have a mixture of low and high fee pools, more farming incentives on important pools to facilitate both volume and LP growth, and increased community education to make more LPs aware of Meteora’s unique benefits.
We hope to first start a transparent conversation and spread awareness around this topic, so that we can find a suitable solution together as a community! Thank you everyone for participating in our call!
Feel free to share your ideas in our Meteora discord.
