Decentralized exchange Kyber Network has announced its Kyber 3.0 upgrade, which will introduce a Dynamic Market Maker (DMM).
Kyber Network and the DMM
In its announcement, Kyber Network calls the upgrade the most significant change to Kyber since its inception.
Kyber 3.0 will introduce a new DeFi innovation known as a Dynamic Market Maker (DMM). The team claims that this will eliminate the problems that popular decentralized trading platforms currently face, such as low capital efficiency and high slippage.
The team says the new upgrade will transition its existing platform from a single protocol into a hub of liquidity protocols. Thanks to the DMM, “Kyber will become a hub for liquidity innovation and growth,” Kyber Network CEO and co-Founder Loi Luu stated in a release.
Improving Upon AMMs
Kyber Network also describes DMM as an improvement over automated market-makers (AMMs).
Due to the static nature of popular AMMs, most participating liquidity providers have little control over the pricing system offered to traders.
By contrast, Kyber’s DMM is much more capital efficient, as it allows dynamic fine tuning of trading parameters for liquidity pools. For example, liquidity pool operators using a DMM can adjust their pricing curves in advance based on particular token pairs.
The DMM will automatically adjust fees for liquidity providers based on market conditions. This will prevent impermanent loss that can occur on AMMs like Uniswap during price volatility.
The new update will also make Kyber permissionless to a greater extent. Anyone can contribute to liquidity by depositing tokens into different pools, and any dApp or end-user can source that liquidity.
KNC Token Migration
Kyber Network has also announced a proposal concerning KyberDAO and the migration of the project’s KNC token.
If the proposal succeeds, the token will be moved to a new contract to support Kyber 3.0’s architecture. This will create multiple streams of token utility and add to the token’s governance power. The proposal will be voted on in the future by KNC token holders.
The Kyber 3.0 upgrade will occur in two phases, Katana and Kaizen, which are expected to be complete by late Q3 2021.