Dynamic Market Maker (DMM)

Revolutionary Liquidity Model

Blast Futures Exchange introduces a revolutionary new model for market making: the Dynamic AMM (DMM) Vault on BFX. This innovative solution addresses critical pain points faced by traditional AMM liquidity providers and offers a seamless solution for users to provide liquidity in an orderbook easily. Users can deposit USDB to BFX DMM Vault and earn a share of trading profits, and maker fees from the exchange.

The Problem

Barrier To Entry — Providing liquidity is hard if you’re not a professional market maker. You need trading and technical expertise, hundreds of thousands dollars worth of infrastructure, and a team of traders monitoring 24/7.

Liquidity Limitations — Whereas Automated Market Maker (AMM) based perpetual DEXs often have limited markets available for trading. This constrains your execution quality and ability to trade new markets with speed and size.

Impermanent Loss — Furthermore, traditional AMMs, such as Uniswap, rely on a constant product formula; this can lead to significant impermanent loss (IL) over time when asset prices experience just day-to-day fluctuations. This structural shortcoming for passive market making (LP’ing) creates a loss of value for liquidity providers compared to simply holding their assets.

Introducing Dynamic Market Maker (DMM)

Dynamic AMM. No impermanent loss.

Providing liquidity is hard. Our DMM fixes this. Utilizing the most up-to-date market information, including best bid/ask prices, with millisecond accuracy. It ensures that liquidity provision is effortless, profitable, and highly efficient.

The DMM is a “fully informed” model compared to “zero information” x*y=k AMMs. Passive LP’ing is low-information market making, the DMM is active, high-information market making. Our novel approach sets the Blast Futures Exchange DMM apart from traditional AMM models and offers users a more secure and stable method of earning yield.

Some unique structural benefits of the DMM:

  • No impermanent loss: The real-time index-based mechanism works by continuously adjusting prices to track the prices of the underlying assets in the spot market. This “high-information” active approach provides a major advantage in mitigating IL risk.

  • Earn maker incentives: DMM earns maker incentives by providing liquidity to the exchange

  • One-click participation: The DMM vault streamlines the market making process, allowing users to become a market maker without needing in-depth market-making knowledge or complex algorithms. Use the same strategies as a sophisticated market maker with a single click!

  • 24/7 competitive edge: Combining state of the art real-time inventory and risk management to provide a level playing field for all users. The DMM is fully automated: market making while you sleep.

To stake in the DMM, follow these steps:

  1. You will need USDB to stake in the DMM Vaults

  2. Go to https://bfx.trade/vaults

  3. Choose the amount of liquidity you’d like to provide

  4. Deposit your USDB

  5. Start monitoring your results!

Please be advised there are still risks associated with staking in DMM, please read our full disclosure before you place funds at risk.

How It Works

The BFX DMM aggregates real-time bid/ask prices from numerous top centralised, decentralised exchanges and oracles such as Pyth to update the price levels of the AMM strategy with millisecond accuracy.

The AMM prices are calculated based on the following formula:





quoteSize=(TVL/marketscurrentPosition)/40.1/(0.920(10.910))quoteSize =(TVL/markets-currentPosition)/4*0.1/(0.9^{20}*(1-0.9^{10}))



Risk Parameters

The strategy risk parameters include dynamic adjustments based on market skewness, cross-correlation across markets, factors like liquidity, volatility, and trading volume. The maximum position limit scales linearly to the Total Value Locked (TVL) in the vault.

The DMM Vault does not use any leverage.

DMM vault uses dynamic spread adjustment using short and medium term volatility regression bands.

Incremental back-off offsets based on current position size and max position size.

Dynamic sizing of orders based on current position size and max position size.

More long skew = smaller bid size & higher bid offset

More short skew = smaller ask size & higher ask offset

Max position size scales linearly with the TVL of the vault.

Back-off offsets based on the cross-correlation matrix of each market.

Max position for each market depends on liquidity, volatility and trading volume.


Please be aware that participation in the Blast Futures Exchange DMM Vault carries inherent risks, including but not limited to counterparty risks, price risks, and index risks. By participating in the DMM Vault, you acknowledge and accept these risks and agree that you are solely responsible for any decisions you make in connection with the Vault.

Counterparty risks: The DMM is providing liquidity, and is counterparty to traders. If traders trading against your DMM orders makes a profit, that will come from the value of the DMM vault.

Price risks: The value of the assets in the Blast Futures Exchange AMM Vault is subject to market fluctuations and may experience significant volatility. While our index-based price adjustment mechanism aims to reduce impermanent loss, we cannot guarantee the protection against all price-related risks. By participating in the Blast Futures Exchange AMM Vault, you accept the possibility of fluctuations in asset values and the potential for losses due to price volatility.

Index risks: The Blast Futures Exchange DMM Vault relies on an external index to adjust asset prices within the pool. This index may be subject to inaccuracies, manipulation, or other issues that could impact the performance of the Vault. We cannot guarantee the accuracy or reliability of the index, and any issues with the index may result in adverse consequences for the Vault and its participants. By using the Blast Futures Exchange DMM Vault, you acknowledge the potential risks associated with the index and agree that we are not responsible for any losses or damages resulting from index-related issues.

Smart contract risks: As with any blockchain-based platform, the DMM Vault is governed by smart contracts. These contracts may contain vulnerabilities or bugs that could potentially lead to loss of funds or other issues. However, our team has conducted rigorous audits and thorough testing to mitigate this risk as much as possible.

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