What is a DLMM? How Concentrated Liquidity Works on Solana
A DLMM (Dynamic Liquidity Market Maker) lets liquidity providers place their capital within specific price ranges. Instead of spreading money across all possible prices, you choose exactly where you want to provide liquidity. When trades happen in your range, you earn fees. Meteora popularized this model on Solana.
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Quick Answer
A DLMM concentrates your liquidity into price "bins" you select. If SOL trades between $180-$220 and you provide liquidity in that range, your capital works 5-10x harder than a traditional AMM where it's spread from $0 to infinity. You earn more fees per dollar when price action stays in your chosen range.
What does DLMM stand for?
DLMM stands for Dynamic Liquidity Market Maker. Meteora created this term for their concentrated liquidity system on Solana. Other exchanges use different names for similar concepts:
- Meteora: DLMM
- Orca: Whirlpools
- Raydium: CLMM (Concentrated Liquidity Market Maker)
- Uniswap (Ethereum): Uniswap v3
The core idea is the same across all of them: let LPs choose their price range instead of forcing them to cover every possible price.
How DLMMs differ from regular AMMs
Traditional AMMs like Uniswap v2 or Raydium's standard pools use a simple formula: x * y = k. Your liquidity gets spread across all prices from zero to infinity. This sounds good in theory, but it's wasteful in practice.
Here's why: If you deposit $10,000 into a SOL/USDC pool and SOL trades between $150-$250 for the entire month, most of your capital sat unused. You only earned fees on the tiny fraction that was active at the current price.
DLMMs fix this by letting you pick a range. Put that same $10,000 into a $150-$250 range, and now all of it works when price is anywhere in that zone.
The tradeoff: If price moves outside your range, you stop earning fees entirely. Your position also converts fully to one token (the one that's now worth less). This is where tools like CLOBr help—you can see where other LPs have placed their liquidity before deciding your own range.
The bin system explained
Meteora's DLMM breaks the price curve into "bins." Each bin covers a small price increment. When you add liquidity, you're filling bins.
Think of it like this: A parking garage has numbered spots on each floor. You decide which floors to park on. If most cars enter on floors 3-5, the spots there earn more in fees. Park on floor 20 and you might earn nothing if no one goes up there.
Bin width determines how granular your positions are. Smaller bins = more precision, but more bins to manage. Larger bins = easier management, but less control.
Most LPs on Meteora use a strategy called "spot" for active positions or "curve" for longer-term holdings. The strategy affects how your liquidity distributes across bins.
Why traders care about DLMM liquidity
If you're trading (not providing liquidity), DLMM data tells you where buy and sell pressure actually sits.
Support levels: When you see a large amount of concentrated liquidity below the current price, it creates buying pressure as price drops into those bins. The larger the liquidity, the more buy orders get absorbed before price can fall further.
Resistance levels: Concentrated liquidity above current price works the opposite way. Price rises into those bins and gets sold into the waiting liquidity.
This is different from technical analysis. TA support/resistance is based on historical price action and pattern recognition. DLMM liquidity shows you actual capital deployed right now. One looks at the past, the other looks at the present.
CLOBr aggregates this concentrated liquidity data from Meteora, Orca Whirlpools, and Raydium CLMM into a single view. You can see the total liquidity depth at each price level without checking three different platforms.
Which Solana DEXs use DLMMs?
| Platform | Pool Type | Notable Features |
|---|---|---|
| Meteora | DLMM | Customizable bin sizes, strategy presets, strong LP community |
| Orca | Whirlpools | Clean interface, "full range" option for passive LPs |
| Raydium | CLMM | High volume pairs, integration with order book |
All three platforms show your position's liquidity range on their interfaces. But none of them show you the aggregate picture across all platforms—that's the gap CLOBr fills.
How to read DLMM liquidity charts
When you look at a liquidity depth chart (like those on CLOBr), here's what you're seeing:
- Horizontal bars below current price (gray): Buy-side liquidity. Sells get absorbed here. Longer bars = more support.
- Horizontal bars above current price (orange): Sell-side liquidity. Buys get absorbed here. Longer bars = more resistance.
- Gaps with no bars: Price can move quickly through these zones because there's nothing to slow it down.
Example: A memecoin shows $50,000 of concentrated liquidity at -10% from current price, but only $5,000 at -5%. If selling pressure hits, price will likely drop quickly through the thin zone and slow down at the thick one.
Common mistakes new DLMM users make
1. Setting ranges too tight
You want to maximize fee earnings, so you set a 2% range. Problem: memecoin volatility means price leaves your range in hours and you stop earning. Wider ranges earn less per trade but stay active longer.
2. Ignoring existing liquidity
Before placing your LP, check where others have positioned. If everyone crowds the same range, you're competing for the same fees. Sometimes the better play is a slightly different range.
3. Treating it like "set and forget"
DLMMs need more attention than traditional LPs. Price moves, your range becomes stale, and you're earning nothing while experiencing impermanent loss. Check your positions at least daily on volatile tokens.
4. Not understanding impermanent loss
When price moves to the edge of your range, your position converts to mostly one token. If price keeps going, you're left holding the token that dropped. This is the same impermanent loss from traditional AMMs, but concentrated into your specific range.
Frequently Asked Questions
What's the difference between DLMM and CLMM?
Same concept, different names. DLMM is Meteora's term, CLMM is Raydium's term. Both refer to concentrated liquidity where LPs choose price ranges.
Is DLMM better than a regular AMM?
Depends on your situation. DLMMs can earn higher fees with the same capital, but require more active management. If you want passive income without checking daily, a regular AMM with wider exposure might suit you better.
Can I lose money with DLMM?
Yes. Impermanent loss affects all LP positions. With concentrated liquidity, the loss can be more severe because it's concentrated in your chosen range. If the token you're LPing drops 80%, you'll own mostly that token at the lower price.
What is the best DLMM bin width?
There's no universal best. Tight ranges (1-2% bins) earn more fees when price stays in range but go out of range quickly. Wider ranges (10%+ bins) stay active longer but earn less per trade. Match your bin width to the token's volatility.
How do I see DLMM liquidity for a token?
CLOBr aggregates DLMM liquidity from Meteora, Orca Whirlpools, and Raydium CLMM into a single chart. Search for any Solana token to see where concentrated liquidity sits across all platforms.
See DLMM Liquidity for Any Solana Token
CLOBr aggregates concentrated liquidity from Meteora, Orca, and Raydium into a single chart. Find support and resistance levels before placing trades or LP positions.
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