Decentralized exchange Kyber has launched a dynamic market maker, or DMM, in what it claims to be a world first.
The new platform, announced on April 5, has been designed to optimize commissions and enable extremely high capital efficiency for liquidity providers.
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One of the main differences between the new Kyber platform and the usual Automated Market Makers, or AMMs, is the commission generation system. While platforms like Uniswap charge a fixed trading fee of 0.3%, the new DEX will calculate fees dynamically, increasing at times of high volatility and demand, and decreasing when markets are calm. This encourages traders to take advantage of cheaper trading opportunities that improve capital efficiency for LPs and the platform.
The system mimics Uber’s pricing system, which raises prices when there is high demand for travel, such as in bad weather or rush hours, and lowers prices when there is less demand and traffic levels have returned to normal.
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Kyber Network is an on-chain liquidity protocol that features a DEX called KyberSwap, which allows users to trade crypto assets without a central order book or trader. Much of the inspiration for the new DMM has been taken from the current Uniswap interface.
According to the DMM board, the liquidity on the platform is currently $ 20.5 million with a daily volume of $ 490,000. Kyber’s native token KNC has fallen back in the last 24 hours dropping 5.7% to $ 3.13 according to Coingecko.
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The new DMM also operates a “programmable price curve” that allows liquidity pool creators to customize prices through an “amplification factor” based on the nature of the relationship between the two tokens.
In essence, tokens that have less deviation from their prices, such as stablecoins, can have a higher amplification factor that allows increasing liquidity without the need to have more tokens in the pool. These features have also been included in the Uniswap v3 update, which also aims to improve capital efficiency by optimizing the peg curve.
Pool creators can set their own AMP factor which increases liquidity depending on the type of tokens in the pool, stable tokens can have a higher factor, while the more volatile ones will be set lower.
“This means that given the same pool of liquidity and the same size of operations, Kyber DMM can provide much better liquidity and slippage compared to AMMs. Slippage can potentially be 100 times better than AMMs for the most stable pairs ”
The announcement adds that the code has been reviewed and audited multiple times by both the internal team and external auditors with no critical issues found. It is stated that the full audit will be published shortly, but it is added that the protocol is still in beta.
