What is Meteora (MET)? Meteora operating model
Meteora is gradually becoming a new phenomenon of the Solana ecosystem, but this product was built in 2021. So what is Meteora? What is Meteora's operating model like? Let's learn about the Meteora project through the article.
What is Meteora?
Meteora is a decentralized exchange (DEX) on the Solana network, renamed from the Mercurial project. Meteora's purpose remains the same as before, which is to become the main liquidity provider on Solana, through the use of a variety of operating models from CLMM to multi-token.
In addition, Meteora has a relatively rapid growth period after the name change, when TVL increased from 40 million USD to 200 million USD in just one year (February 2023 - February 2024).
Meteora operating model
Currently, Meteora uses four operating models including:
- DLMM
DLMM is a centralized liquidity supply model (CLMM), allowing users to add liquidity at certain price ranges. Different from regular CLMM projects, Meteora uses a structure similar to Trader Joe's Liquidity Book.
Specifically, the project divides prices into very small price ranges, instead of a wide range like other projects. For example, if a user swaps AVAX at 20 USD, the bin price range being swapped is about 20.01 USD or 19.99 USD.
But if in other projects, the price range falls between 19 USD and 21 USD. Therefore, this helps users limit price slippage when trading on Meteora.
In addition, DLMM has three liquidity provision modes including:
**Spot: Evenly distributed mode in bins within the price range, suitable for asset pairs with low volatility.
**Curve: Allocation mode mostly in the center of the price range and gradually smaller at the outer edge. Typically, Curve is suitable for stablecoin pairs.
**Bid-ask: Large allocation mode on the two edges of the price range, but lowest in the center. Bid-ask is suitable for highly volatile asset pairs.
