The decentralized exchange protocol Kyber Network (KNC) has announced the launch of a dynamic market making (DMM) protocol. According to the announcement, the protocol is better than Automated Market Making (AMM) protocol because it is more capital efficient.
The new Kyber DMM will optimize and maximize profits for liquidity providers, according to the company’s announcement.
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With this release, the DMM has been updated with two new functions: “programmable price curve” and “dynamic rates”.
Amplifying the balances of the network in the pool
Kyber Network CTO Victor Tran commented on the new release. He stated that each time the tokens are added, the “AMP will virtually amplify the balances of the tokens in the pool.”
It means that with the same trade size and liquidity pool, Kyber DMM can offer much better slippage and liquidity compared to AMMs, Tran added.
Slippage is the difference between a trade’s execution price and its expected price. It has the potential to become “100 times better” compared to MMA when it comes to more stable pairs.
However, Tran noted that there is always a negotiable price range for the token pair in that pool.
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More protocols will be added in the future
In terms of dynamic rates, Tran noted that each liquidity pool will not support the generally fixed rate model, but rather a dynamic rate model.
Tran added that fees will likely decrease during low market volatility and increase at times of high volatility. This is correct to encourage more trade.
Generally, you will optimize the potential returns for liquidity providers, which is similar to market makers’ operating methods to get the best return on your trades.
Tran stated that the DMM will not be the only protocol to be released on the Kyber 3.0 platform as many more protocols are expected in the future.