> For the complete documentation index, see [llms.txt](https://docs.sectorone.xyz/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.sectorone.xyz/sectorone-dex/dlmm-pools.md).

# | DLMM Pools

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**DLMM (Dynamic Liquidity Market Maker)** divides a pool’s price curve into discrete price **bins**, with each bin representing a specific price point. Liquidity providers can precisely choose how their liquidity is distributed across these bins, allowing them to concentrate liquidity around specific price points. \
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For example, a LP (Liquidity Provider) can provide $USDC–$USDT liquidity between $0.99 and $1.01. The position earns trading fees whenever swaps utilize the bins containing the provider's liquidity.\
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This approach is a form of **concentrated liquidity** that gives liquidity providers greater flexibility and control over liquidity deployment compared to traditional AMMs. By enabling precise liquidity allocation with bins, DLMM can improve capital efficiency, support more flexible liquidity strategies, and enable more efficient trading execution. Swaps executed entirely within a single bin experience [zero price slippage](#zero-slippage), while optimized [bin step settings](#bin-steps) and [dynamic fees](/sectorone-dex/dlmm-pools/dynamic-fees.md) allow DLMM pools to adapt to changing market conditions.\
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Each swap generates a trading fee, which is distributed according to the fee settings of the respective DLMM pool. On SectorOne, liquidity providers receive 90-95% of trading fees, while the remaining 5-10% is allocated to protocol operations.\
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For **Auto DLMM pools**, the earned fees are automatically compounded back into the liquidity position by reinvesting them into the current active bin where the trade happened. When liquidity providers withdraw their position, they automatically receive their underlying liquidity together with all accumulated trading fees.\
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For **Claim DLMM Pools**, the earned trading fees are not automatically compounded. Instead, liquidity providers must manually claim their accumulated trading fees through the pool interface.

Learn more about the DLMM pool fee distribution and LP returns in [DLMM Earnings](/tokenomics/dex-economics/dlmm-earnings.md).

### Bins in DLMM Pools

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#### DLMM Bins

In DLMM, liquidity is organized into discrete price points called **bins**. Instead of providing liquidity across a continuous price curve, the DLMM price curve is divided into individual **bin steps**, where each bin represents a specific and fixed price.

This concept is similar to the Uniswap V3 tick system, where liquidity providers choose specific price ranges in which their liquidity is active. However, DLMM differs by using individual price bins rather than continuous ranges. Each bin contains its own liquidity balance, and swaps execute against one bin at a time. As long as sufficient liquidity remains in the active bin, trades execute entirely at that bin's fixed price with zero price slippage.\
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DLMM bins use a **constant-sum pricing formula&#x20;*****(x + y = k)*** instead of the constant-product model used by traditional AMMs *(x \* y = k)*. With the constant-sum model, assets inside a bin are exchanged at a fixed price, allowing trades to occur with zero slippage within that bin until the available liquidity is consumed.\
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This bin-based structure allows DLMMs to achieve highly efficient liquidity allocation. Liquidity providers can precisely shape how their liquidity is distributed across individual price points, concentrating capital where trading activity is expected while avoiding unnecessary liquidity allocation across inactive price ranges.

#### Bin Steps

The **bin step (bps)** in DLMM pools is the price difference between two consecutive bins. It determines the gap between two available price points.

For example, a $USDC–$USDT pool has a current price of $1. \
A *one basis point bin step* (*1 bps)* equals to `0.0001`, or `0.01%`. \
The next prices are $1.0001 and $1.00020001, which forms a geometric sequence.

Bin steps are not limited to only one basis point. The initial pool creator sets this parameter when creating the pool. It cannot change later. A token pair can therefore have multiple DLMM pools with different bin step or fee settings.

Learn how fees settings work at SectorOne DLMM pools in [Dynamic Fees](/sectorone-dex/dlmm-pools/dynamic-fees.md).

#### Zero Slippage

Swaps or trades that execute entirely within one single bin have **zero price slippage**. This is because every bin represents a fixed price, allowing the trade to execute entirely at that price as long as sufficient liquidity remains in the active bin.\
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Once the liquidity in the active bin is exhausted, the swap moves to the next available bin. Since each bin represents a different fixed price, crossing from one bin to another changes the execution price and introduces price slippage. Therefore, slippage can only occur when a trade consumes all available liquidity in the current active bin and continues into the next bin with a different price and available liquidity. \
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Depending on the DLMM pool bin step setting, price movement tend to occur in very small increments rather than through large continuous curve adjustments. This can significantly reduces price impact and slippage compared to traditional AMMs, allowing liquidity providers to deploy liquidity more efficiently around the active trading price. Combined with the dynamic fee system, DLMM pools can adapt in real time to changing market conditions while maintaining competitive trading conditions.

#### Liquidity Shapes

A liquidity shape determines how liquidity is distributed across the deployed bins. SectorOne offers three predefined liquidity shapes for DLMM pools *(Spot, Curve, Bid-Ask*). These shapes can be used with any liquidity deployment - two-sided or single-sided, below, above, or around the active price - and with any allocation of tokens.

<table data-view="cards"><thead><tr><th align="center"></th><th></th><th data-hidden data-card-cover data-type="image">Cover image</th><th data-hidden data-card-target data-type="content-ref"></th></tr></thead><tbody><tr><td align="center"><strong>SPOT</strong></td><td>Equal distributed liquidity weight in all deployed bins per side.</td><td><a href="https://2555047574-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F32p5iEGNGliN3EmvxwD7%2Fuploads%2FIlUc37LhxyeugM5Dpcd0%2FThumbnail-Icon-Spot.jpg?alt=media&amp;token=6c28c1a0-cdf6-475d-bfce-5aec22bea595">Thumbnail-Icon-Spot.jpg</a></td><td></td></tr><tr><td align="center"><strong>CURVE</strong></td><td>Highest liquidity weight at the active bin, tapering outward on both sides.</td><td><a href="https://2555047574-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F32p5iEGNGliN3EmvxwD7%2Fuploads%2FiWl5nBSlTZ7bdXBolbHd%2FThumbnail-Icon-Curve.jpg?alt=media&amp;token=f2e830b9-3949-4d17-9986-337bafc1f37d">Thumbnail-Icon-Curve.jpg</a></td><td><a href="broken://pages/2bPqhlNJ7WEMI3MU5DrK">Broken link</a></td></tr><tr><td align="center"><strong>BID-ASK</strong></td><td>Two-sided liquidity weight resembling an order-book style spread. </td><td><a href="https://2555047574-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F32p5iEGNGliN3EmvxwD7%2Fuploads%2Fu787DNu8u0E1UWLVeBxj%2FThumbnail-Icon-Bid-Ask.jpg?alt=media&amp;token=30e140ea-add2-455f-a8fe-6b13da259575">Thumbnail-Icon-Bid-Ask.jpg</a></td><td></td></tr></tbody></table>

* **Spot:** Deploys liquidity with equal liquidity weights across all selected bins per side, providing a balanced exposure over the chosen range. The spot shape is considered to be the most forgiving and easiest to manage.
* **Curve:** Deploys liquidity in a curve shape by overweighting the bins nearest the current price while still allocating liquidity to surrounding bins, making it well suited to stable or mean-reverting markets. The curve shape around the active bin can increase capital efficiency.
* **Bid-Ask:** Deploys liquidity across bins below and above the active price, intentionally underweights the current price and overweights bins on both sides. Liquidity below the active price forms the bid side, while liquidity above the active price forms the ask side. This offers the highest potential fee capture in range-bound markets but also requires the most active management.

**Custom Liquidity Shapes:** Liquidity providers can also create custom shapes and bin distributions by stacking multiple liquidity shapes on top of each other across selected bins. This makes liquidity providing with DLMM more flexible and easier to adapt to current market conditions without having to remove the entire LP position each time.\
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The chosen liquidity shape, bin distribution, bin step, and fee setting all influence capital efficiency, trading fee exposure, and token composition as market prices move.<br>

Learn about custom liquidity shapes and active approaches in [DLMM Strategies](/sectorone-dex/dlmm-pools/dlmm-strategies.md).