DLMM Pool Operations Tutorial

Learn how to work with Dynamic Liquidity Market Maker pools using the Saros DLMM SDK.

Overview

This tutorial will guide you through the process of interacting with DLMM pools using the Saros DLMM SDK. DLMM provides concentrated liquidity and improved capital efficiency compared to traditional AMMs.

50 min

Estimated Time

Advanced

Difficulty

Solana

Blockchain

1. Prerequisites

Before starting this tutorial, ensure you have the following:

Node.js 16+ and npm/yarn installed
Advanced knowledge of TypeScript/JavaScript
A Solana wallet with some SOL for transaction fees
Understanding of liquidity provision and AMM concepts
Familiarity with the concepts of concentrated liquidity (recommended)

Install Dependencies

// Install the required packages
npm install @saros-finance/dlmm-sdk @solana/web3.js

// Import the necessary modules
import { LiquidityBookServices, MODE } from "@saros-finance/dlmm-sdk";
import { PublicKey } from "@solana/web3.js";

2. Initialize DLMM Service

First, we need to initialize the LiquidityBookServices with the appropriate network mode.

Initialize Service

// Initialize the DLMM service
const liquidityBookServices = new LiquidityBookServices({
  mode: MODE.DEVNET, // or MODE.MAINNET
});

// Define your wallet address (in a real app, this would come from a connected wallet)
const YOUR_WALLET = "YOUR_WALLET_PUBLIC_KEY";

3. Get Swap Quote

Before executing a swap, get a quote to see the expected output amount and price impact.

Get Swap Quote

// Get a quote for a swap operation
const quoteData = await liquidityBookServices.getQuote({
  amount: BigInt(1000000), // 1 USDC (6 decimals)
  isExactInput: true,
  swapForY: true,
  pair: new PublicKey("EwsqJeioGAXE5EdZHj1QvcuvqgVhJDp9729H5wjh28DD"), // Pool address
  tokenBase: new PublicKey("C98A4nkJXhpVZNAZdHUA95RpTF3T4whtQubL3YobiUX9"), // Base token
  tokenQuote: new PublicKey("EPjFWdd5AufqSSqeM2qN1zzybapC8G4wEGGkZwyTDt1v"), // Quote token
  tokenBaseDecimal: 6,
  tokenQuoteDecimal: 6,
  slippage: 0.5 // 0.5% slippage tolerance
});

console.log('DLMM Quote:', {
  amountIn: quoteData.amountIn.toString(),
  amountOut: quoteData.amountOut.toString(),
  priceImpact: quoteData.priceImpact,
});

4. Execute Swap

Execute a swap using the quote data from the previous step.

Execute Swap

// Execute a swap using the quote data
const transaction = await liquidityBookServices.swap({
  amount: quoteData.amount,
  tokenMintX: new PublicKey("C98A4nkJXhpVZNAZdHUA95RpTF3T4whtQubL3YobiUX9"), // Token X
  tokenMintY: new PublicKey("EPjFWdd5AufqSSqeM2qN1zzybapC8G4wEGGkZwyTDt1v"), // Token Y
  otherAmountOffset: quoteData.otherAmountOffset,
  isExactInput: true,
  swapForY: true,
  pair: new PublicKey("EwsqJeioGAXE5EdZHj1QvcuvqgVhJDp9729H5wjh28DD"), // Pool address
  payer: new PublicKey(YOUR_WALLET) // User's wallet
});

console.log('DLMM swap transaction created:', transaction);

Understanding DLMM Swaps

1. Get Quote: We call liquidityBookServices.getQuote to calculate the expected output amount and other parameters needed for the swap.

2. Execute Swap: We use liquidityBookServices.swap to create the transaction for the token exchange.

3. Concentrated Liquidity: DLMM uses concentrated liquidity bins for more efficient price discovery and reduced slippage.

5. Position Management

Manage liquidity positions in DLMM pools by adding or removing liquidity within specific price ranges.

Position Management

// Example of position management in DLMM
// (This is a conceptual example as the actual API may vary)

// Add liquidity to a specific price range
const addLiquidityTx = await liquidityBookServices.addLiquidity({
  pair: new PublicKey("EwsqJeioGAXE5EdZHj1QvcuvqgVhJDp9729H5wjh28DD"),
  tokenXAmount: BigInt(1000000), // 1 token X
  tokenYAmount: BigInt(2000000), // 2 token Y
  binLower: -100, // Lower price bin
  binUpper: 100,  // Upper price bin
  payer: new PublicKey(YOUR_WALLET)
});

// Remove liquidity from a position
const removeLiquidityTx = await liquidityBookServices.removeLiquidity({
  position: positionPubkey, // Position NFT pubkey
  liquidityBps: 5000, // 50% of liquidity (5000 bps)
  payer: new PublicKey(YOUR_WALLET)
});

Understanding Position Management

1. Add Liquidity: Provide liquidity within a specific price range to earn fees when trades occur in that range.

2. Remove Liquidity: Remove your liquidity from a position when you want to stop earning fees or adjust your strategy.

3. Capital Efficiency: Concentrated liquidity allows for higher capital efficiency compared to traditional AMMs.

Key DLMM Concepts

Bins

DLMM divides the price curve into discrete "bins" where liquidity is concentrated. Each bin represents a narrow price range.

Concentrated Liquidity

Instead of spreading liquidity across the entire price curve, liquidity providers can concentrate their capital within specific price ranges.

Position NFTs

Liquidity positions in DLMM are represented as NFTs, allowing for easy management and transfer of positions.

Reduced Slippage

Concentrated liquidity leads to deeper markets within price ranges, resulting in reduced slippage for traders.

📚 Next Steps

Continue learning with these related tutorials

Token Swapping Liquidity Management View Example Code Try in Playground

💡 Key Takeaways

Capital Efficiency: DLMM's concentrated liquidity model provides higher capital efficiency compared to traditional AMMs.

Price Range Selection: Carefully select price ranges for liquidity provision to maximize fee earnings while minimizing impermanent loss.

Active Management: DLMM positions may require more active management to adjust to changing market conditions.

Lower Slippage: Traders benefit from reduced slippage due to deeper liquidity within specific price ranges.

Network Configuration: Use the correct RPC endpoints for devnet, testnet, or mainnet depending on your environment.