Introducing Dynamic AMM v2: A Reverse Japanese Auction for Fee Control

On May 23, Solana co-founder Anatoly Yakovenko shared insights on Dynamic AMM v2 in an X post. He described the dynamic fee scheduler as a simple, fast way to limit sniper trading risk.

May 23 saw Anatoly Yakovenko, co-founder of Solana, share insights on Dynamic AMM v2 in an X post. He highlighted the dynamic fee scheduler as a simple, fast way to limit sniper trading risk. Yakovenko likened the scheduler to a reverse Japanese auction mechanism for fee control. This update follows an announcement by Meteora Network of the full integration of DAMM v2 pools. The pools are now available on Axiom Exchange, Photon, Jupiter Exchange, and Dexscreener platforms. This integration makes Dynamic AMM v2 accessible to all projects within the Solana ecosystem.

Dynamic AMM v2 is a newly introduced automated market maker program for improved liquidity management. It provides more control over transaction fees compared to earlier versions. Unlike its predecessor, this version is a standalone implementation rather than an upgrade. A key innovation includes the LP Fee Scheduler, which lowers fees over time. This scheduler acts as a deterrent to automated sniper trades at launch events. Pool creators can now set provider fees that gradually decrease after launch. The program enhances flexibility for liquidity providers and token launch platforms.

Moreover, Dynamic AMM v2 supports both SPL and Token 2022 token standards seamlessly. This compatibility enables features like transfer fee extensions and metadata pointers. Users can effortlessly leverage newer token functions across the Solana ecosystem. Additionally, the program introduces a concentrated liquidity model for higher capital efficiency. Liquidity can be focused within specific price ranges to improve returns. This option provides a level of control not available in traditional AMM systems. Developers can tune these settings to match their project needs flexibly. This feature supports optimized capital use across various market conditions and cycles.

Dynamic AMM v2 uses position NFTs instead of standard LP tokens for liquidity tracking. Each non-fungible token represents an individual liquidity position in a pool. Users can transfer these NFTs between wallets easily and securely. This approach allows new secondary markets for liquidity positions in the future. It marks a major architectural change in user participation tracking and management. Pool creators gain more control over position flexibility and trading options. This innovation could reshape liquidity pool interactions across decentralized finance platforms. Users may benefit from more transparent and transferable liquidity positions.

Dynamic AMM v2 introduces customizable fee structures for volatile markets. Creators set a base fee plus a variable component based on volatility. This structure can maximize returns for providers during price swings. Fee collection is now entirely separate from liquidity withdrawal processes. Providers can claim fees independently using preferred tokens like SOL or USDC. This change simplifies reward management for liquidity suppliers across pools. It also helps reduce complexity in multi-token reward distribution systems. Pools now support more granular fee and reward configurations for teams.

Dynamic AMM v2 includes flexible liquidity lock options for pool creators. Locks can be permanent or subject to custom vesting schedules. Fee claims remain accessible despite liquidity being locked in pools. This approach balances long-term commitment with ongoing reward access for participants. The program now integrates a built-in farming mechanism directly into its code. Developers no longer need separate farming contracts for reward distribution. This integration streamlines setup and reduces external dependencies for protocols. Teams can deploy pools faster without requiring additional farming infrastructure.

Unlike earlier versions, Dynamic AMM v2 does not integrate with Dynamic Vaults. Each liquidity pool now uses dedicated accounts for swap instruction processing. This separation improves transaction efficiency and lowers computational resource costs. Solana co-founder Anatoly Yakovenko’s praise for the rollout highlights the continued progress in the blockchain space. As part of this wave, Meteora Network aims to build customizable infrastructure for decentralized trading protocols. This has led to the creation of programs like the Dynamic AMM v2.