Kyber Launches Dynamic Market Maker to Optimize Liquidity Provider Fees

Kyber Network, a decentralized exchange, launched a new product called a dynamic market maker (DMM), which the project says will optimize fees for liquidity providers (LPs).

The first difference from automated market makers (AMM) is that while the 0.03% which Uniswap LPs receive is fixed, Kyber has introduced “dynamic fees” which increase during times of high volatility, capturing increased demand for trading, and decrease during periods of low volatility, thus encouraging traders to take advantage of cheaper trade opportunities. 

The second feature is what the project calls the “programmable pricing curve” which allows liquidity pool creators to customize their pool’s pricing curve based on the nature of the two assets’ relationship. So, if a pool consists of two $1-pegged stablecoins for example, the pool’s creator can create a curve which has a high “amplification factor,” which essentially allows for liquidity to increase without needing more tokens because the pair aren’t expected to deviate much from one another in terms of pricing. This feature indicates a trend started by Uniswap of increasing capital efficiency of AMMs, perhaps reducing the effectiveness of metrics like TVL.

Kyber’s upgrade comes amid increased competition in the AMM field. The DEX’s total value locked (TVL) has dropped 45% to $13.3M in the last 90 days.