In DeFi, Solana is the most popular mainstream ecosystem for traders, especially for memecoins, because of its high speed, low fees, and scalability. But its low liquidity is creating problems in user adoption and growth. Liquidity enhancers like Meteora are designed to tackle this problem, helping to increase Solana’s liquidity. Meteora aims to address this issue by building a sustainable liquidity layer to support Solana’s growth as a mainstream crypto trading hub.

What is Meteora?

Meteora focuses on liquidity provision in the crypto space, aiming to create a large community of liquidity providers. It offers tools for decentralized liquidity management, including automated trading, fee analysis, and anti-sniper bot protection for token launches. Key products include the DLMM (dynamic liquidity management module), dynamic pools, dynamic vaults, multitoken stable pools, non-pegged stable pools, and memecoin minting with integrated locked liquidity. Meteora also hosts community events and educational boot camps to support LPs in maximizing yields on platforms like Solana.

Meteora Backgrounds

Based in Singapore, Mercurial was founded in 2021. After the FTX crisis, it rebranded as Meteora and entered the market in 2023. To distance itself from FTX, it also rebranded its token from MER to MET token. It secured funding from ventures like Delphi Venture, HTX Venture, Signum Capital, and Alliance DAO, with key investors including HyperChain Capital and Solar Eco Fund. Ben Chao is the co-founder of Meteora.

Meteora Products

Meteora uses efficient DeFi tools to boost liquidity on Solana, supporting sustainable growth through products like DLMM, dynamic pools, and vaults.

Alpha Vault

Alpha Vault is an anti-trading bot that prevents sniper bots during the launch of tokens and encourages real users to participate in token launches. Any DeFi or Dex that uses the alpha vault feature has the flexibility to predefine parameters, such as setting maximum purchase limits, defining the lock-up, and vesting periods for users so that bots cannot exploit the token. Any users using the vault can buy tokens before launch activation with a fair price and distribution proportional to the amount of USDC deposited.

The whole process of Alpha Vault takes four steps to complete after creating the vault. The first step is the deposit period, which takes place before the token launch, so vault users are the earliest to secure the token at launch. During this period, users can deposit or withdraw USDC from the vault. After the deposit period ends, the vault will buy tokens from the deposited USDC. When the token buying is completed, the pool becomes open and active for everyone to trade and LP. When everything happens, all tokens in the vault will unlock, and token vesting will get activated.

Timeline of Alpha Vault

DLMM

Dynamic Liquidity Market Maker (DLMM) is a concentrated liquidity pool based on Trader Joe’s Liquidity Book. The DLMM organizes the liquidity of an asset pair into discrete price bins and is available for exchange at a predefined price for a particular bin. Price slippage will not affect any trade or swap within the bin.

Anyone can provide liquidity in the DLMM pool with a selected token pair and suited strategies. For that, they can earn dynamic fees during market volatility and LM rewards if available. Currently, there are three liquidity strategies.

• Spot: Provides balanced, risk-adjusted liquidity for any market.
• Curve: Focuses liquidity to maximize efficiency and reduce volatility.
• Bid-Ask: An inverse curve, used single-sided for gradual buy/sell, ideal for capturing stable pair volatility.

Dynamic AMM Pools

Meteora’s Dynamic AMM Pools offer sustainable liquidity by leveraging a capital allocation layer. These pools resemble standard AMMs but allocate idle assets directly into dynamic vaults, using USDC, SOL, or USDT in lending protocols to generate yield and rewards. Like other liquidity mining, Meteora does not depend on unsustainable LPs that can cause issues such as token inflation and short-term liquidity when LPs lose interest after the rewards end. Instead, LPs earn through capital efficiency, creating more sustainable liquidity rewards from different places, such as the lending interest, the liquidity mining rewards, the AMM trading fees, and Meteora liquidity mining rewards.

Apart from LP providers, Meteora has permissionless dynamic pools for projects that want to create their own token pool without depending on a third party for greater flexibility, control, and transparency. To give better rewards, it has implemented three types of pools: Volatile, Stable, and Memecoin pool.

• Volatile pool: In this pool, both tokens are non-stable coins
• Stable pool: Both tokens are stable coins
• Memecoin pool: Memecoin with permanently locked liquidity but still earning fees forever

Dynamic Memecoin Pools

This is a subpool of the dynamic pool with some special features to support meme coin launches and liquidity. Meme pools offer permanently locked liquidity to boost confidence while enabling LPs to earn fees. A dynamic fee (0.15%–15%) is protocol-adjustable to suit market conditions, with 20% allocated as a protocol fee to incentivize volume-driving integrators. Memecoin pools can be tracked on analytics platforms like Birdeye and DEXTools, enhancing visibility for traders and bots.

Anyone can create new memecoin pools, and the liquidity provided is automatically sent to a lock token account for permanent locking. These locked tokens will generate yield and fees that are claimable by the liquidity provider. The liquidity provider can withdraw or keep the supply of earned tokens for longer growth. To create a new memecoin pool:

• Head over to Dynamic Pool Setup and choose the Memecoin option.
• Here, select any memecoin and trading paired SOL or USDT (or other if available).
• After selecting tokens, the user can deposit an initial amount for each of the tokens.
• When all the required fields are filled out, the pool will be created, and the user will be redirected to the new pool’s detail page, as shown below.

Dynamic Vaults

The goal of Dynamic Vault is to secure funds and optimize for higher yield generation. Dynamic Vault is designed to secure and distribute users’ funds across the different lending platforms with the best possible yield. This mitigates the risks that come along with depositing these lending protocols. Deposited funds in the vault are accessible and can be withdrawn at any time by the users. Vault always checks the reserve amount in the lending platform to protect the fund. If the liquidity reserve in the pool falls below a set threshold, the vault will withdraw assets from external protocols to ensure sufficient liquidity is available for user withdrawals.

The vault always monitors and calculates the yield of the connected lending platform and adjusts the balance with the highest APR depending on various factors, such as the borrowing amount, depositing amount, and interest rate model.

The chart below shows how much value has been locked in the vault from different allocators such as Kamino, Vault Reserve, and Marginfi. It includes the TVL of a specific token, its virtual price, and calculated APR.

How dynamic vault works

LST Pools

Meteora’s LST (Liquid Staking Token) pool is designed to support tokens whose value constantly changes due to staking yields that get distributed every time, such as bSOL, mSOL, LST or JitoSOL paired with SOL. These pools are designed to benefit LST creators, liquidity providers, and users by offering the yield-generating nature of staked tokens. The LST protects against impermanent loss and provides better price stability from an on-chain program, and avoids using third-party price oracles. To protect users from low-slippage, it uses stable curve AMM models to concentrate the liquidity and optimize volume capture from swap aggregators like Jupiter so that liquidity providers earn higher fee revenue from increased trading activity.

Memecoin Mint

With Memecoin Mint on Meteora, users can create a token, set up a pool, and add and lock liquidity in a single process. This ensures your liquidity remains permanently locked to build trust with the community, while your wallet can claim fees generated from the locked liquidity indefinitely. To do so:

• Go to the Memecoin Mint page.
• Enter Token Name and Ticker Name.
• Upload the token icon in PNG or JPG format.
• Now, enter how much SOL to allocate to the pool.
• Users also can provide a website and social media URLs; it is optional but increases authenticity.
• Click on the accept term condition and then create the button.

What is the MET token?

MET is Meteora’s community and governance token to help bring liquidity back to Solana DeFi. The goal is to:

• Provide clear, unambiguous tokenomics for potential investors.
• Reduce the protocol ownership share of the team/investors in favor of decentralization.
• Grant the DAO majority control over the token supply to ensure transparent and informed emissions processes.

Meteora approaches to eventually create a long-term sustainable liquidity system and make the MET token the top liquidity source on Solana. The three phases of the MET token movement include Kickstart, Bootstrap, and Sustain.

• Kickstart Phase: Create a DAO and governance system; the aim is to make Meteora decentralized and transparent.
• Bootstrap Phase: Working with DAO to bring an incentive system to attract long-term liquidity providers.
• Sustain Phase: Continue researching and building sustainable liquidity systems to sustain liquidity.

Conclusion

Meteora aims to create a secure, sustainable, and composable liquidity layer for DeFi on Solana. It leverages innovative products like DLMM Pools, Dynamic AMM Pools, and Dynamic Vaults to optimize liquidity, yield generation, and user engagement. By implementing these liquidity solutions, Meteora creates a thriving ecosystem on Solana and establishes Solana as the ultimate trading hub in DeFi.