2026-01-05 21:02:25

During periods of high volatility, how should liquidity be managed?

Ferra provided an answer: different market-making models address different problems and have their limitations. This can be understood from three aspects: price formation, slippage characteristics, and LP risk structure:

- DAMM (Traditional AMM, x·y = k)

This is the most classic market-making model, where the price changes continuously, and each transaction moves the price curve. Advantages — simple structure, no active management needed, suitable for passive LPs. Disadvantages are obvious: funds are evenly distributed across the entire price range, large transactions have high slippage, lowest capital efficiency, and this model is not very friendly to LPs in volatile assets.

- CLMM (Centralized AMM with liquidity)

CLMM improves capital efficiency by allowing LPs to choose price ranges. Liquidity is active only within specified bounds, and fee income is more concentrated. However, the price within the range still changes continuously, slippage remains; if the price moves outside the range, LP becomes a one-sided asset, requiring frequent management and rebalancing, as well as high operational skills.

- DLMM (Dynamic market maker with liquidity)

DLMM is the key difference for Ferra. It does not use a continuous curve but divides the price into discrete bins. Within a bin, the price is fixed, and with sufficient liquidity, transactions can occur with zero slippage; only when a transaction consumes the entire bin does the price move to the next level. Coupled with a dynamic rate that automatically increases during periods of high volatility, this mechanism allows hedging arbitrage risks. For LPs, DLMM offers more controlled execution results, clearer risk structures, and supports both one-sided market-making and various liquidity distribution forms, especially suitable for highly volatile assets and new tokens.

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Key comparison

DAMM enables any trade but with the lowest efficiency; CLMM concentrates funds within efficient ranges but involves high management costs; DLMM allows for more predictable pricing and a more rational LP income structure in volatile markets.

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From a design perspective, DLMM is not just an upgrade of DAMM or CLMM but a rethinking of price formation in high-frequency and high-volatility conditions. That is why Ferra chose DLMM as the fundamental liquidity model, not just an optional feature.

#KaitoYap @KaitoAI #Yap @ferra_protocol

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CoinWorldKing

2026-01-05 03:48:17

In times of high volatility, how should liquidity be managed?

Ferra provides an answer: different market-making models each solve specific problems and have their own boundaries. They can be understood from three dimensions: price formation methods, slippage characteristics, and LP risk structures:

- DAMM (Traditional AMM, x·y = k)

This is the most classic market-making model, where prices change continuously, and every trade moves the price curve. Its advantages are a simple structure, no need for active management, and suitability for passive LPs. The drawbacks are also obvious: funds are spread evenly across the entire price range, large trades incur high slippage, capital efficiency is the lowest, and it is not friendly to LPs in volatile assets.

- CLMM (Concentrated Liquidity AMM)

CLMM improves capital efficiency by allowing LPs to choose specific price ranges. Liquidity is only active within designated intervals, and fee income is more concentrated. However, prices still change continuously within the range, so slippage remains; once the price moves out of the range, LPs become single-sided assets, requiring frequent management and rebalancing, which demands higher operational skills.

- DLMM (Dynamic Liquidity Market Maker)

DLMM is Ferra's core innovation. It does not use a continuous curve but divides the price into discrete bins. Within a single bin, the price is fixed; as long as liquidity is sufficient, trades can be executed with zero slippage. Only when a trade consumes an entire bin does the price jump to the next level. Coupled with dynamic fee rates that automatically increase during high volatility periods, this mechanism hedges arbitrage risks. For LPs, DLMM offers more controllable execution outcomes, clearer risk exposure, and supports both unilateral market-making and various liquidity distributions, making it especially suitable for highly volatile assets and new tokens.

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Summary of core differences

DAMM ensures trades can always be executed but with the lowest efficiency; CLMM concentrates funds within effective ranges but has high management costs; DLMM achieves more predictable price execution and more reasonable LP returns in volatile markets.

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From a design perspective, DLMM is not simply an upgrade of DAMM or CLMM but redefines price formation in high-frequency trading and high-volatility environments. This is also why Ferra considers DLMM as the underlying liquidity model rather than just an optional feature.

#KaitoYap @KaitoAI #Yap @ferra_protocol

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