Meteora’s Open Liquidity is your 5 rings to Financial Freedom

Thousands have yielded financial independence, and you can too…

15 min readAug 8, 2023

Let’s rewind the clock and uncover the intriguing story behind Meteora’s journey.

Once upon a time, in the busy world of blockchain, there was a company named Mercurial. It had big dreams and aspirations, just like a little boy with a vision. But alas, fate had a different plan in store. A storm formed by FTX Almada struck so hard on a rainy day, and it seemed like Mercurial’s dreams were shattered.

Imagine this little boy, filled with hope and ambition, but suddenly knocked down by circumstances beyond his control. It felt like the world was against him. However, this little boy was no ordinary child. He possessed resilience and determination that ran deep within his spirit.

Unshaken by the adversities, the boy summoned his courage and took a leap of faith. He decided to rise above the challenges, reinvent himself, and embark on a remarkable journey of transformation.

Mercurial, who had been pushed to the ground by Alameda’s involvement, rebranded to become Meteora, a symbol of strength and rebirth.

With the support of the Solana Foundation, Meteora discovered a powerful ally in the form of Solana investors. It was like a trusted friend offering a helping hand. His new name, became the beacon that would guide many towards freedom.

The vision of Meteora was simple yet profound. He aimed to restore confidence in Solana DeFi, especially in the lending and stablecoin landscape that had been shaken by the events of FTX. This little boy knew that by building trust and fostering participation, he could ignite a spark of hope that would transcend the boundaries of the entire blockchain.

Meteora set forth three core objectives, each born out of essential needs within the ecosystem. Just like the little boy seeking solutions to his challenges, Meteora sought to:

Provide a safe and optimized yield layer for users and developers, ensuring sustainable growth and empowering them to thrive.
Become the go-to capital allocation layer on Solana, efficiently pooling and directing liquidity to the best lending protocols, like a wise mentor guiding the way.
Build a community-driven capital layer, creating an inclusive, transparent, and trusted environment where everyone’s voice mattered. It was a whole new beginning, a uniting of friends from far and wide, pooling their collective wisdom to shape a better future.

The little boy, Meteora, knew that a stable lending ecosystem was the key to Solana’s success. Just as he learned to stand on his own feet, he understood that a solid foundation was crucial for any endeavor.

By establishing trust, Meteora sought to attract liquidity from far and wide, nourishing the ecosystem and enabling it to flourish.

As the little boy grew, so did Meteora’s vision.

Now, this is where the story gets even more exciting. Meteora had something special up his sleeve. He had crafted ingenious tools that would enhance liquidity on the Solana network, just like magical instruments that amplified the little boy’s talents. These tools included:

Dynamic Vaults, which were like secret treasure chests. They optimized capital utilization, generating attractive yields for liquidity providers. It was like uncovering hidden gems in the vast realm of finance.
Dynamic AMM Pools, where liquidity providers could earn extra rewards by utilizing lending sources alongside traditional swap fees. It was like discovering hidden pathways that led to untapped riches.
Multitoken Stable Pools, which combined liquidity from multiple assets into a single pool, allowing liquidity providers to diversify and maximize their holdings. It was like mixing different colors on a painter’s palette, creating a masterpiece of financial efficiency.
Non-Pegged Stable Pools, tailored specifically for non-pegged assets, maintained the pegged value of assets within the pool, promoting optimal capital efficiency. It was like keeping balance in a world that was constantly shifting.

Dynamic Vaults

To understand how dynamic vaults work, imagine you have a treasure chest, but instead of gold and jewels, it holds something even more valuable — your money! Now, what if this treasure chest had a special power that could make your money grow, even when you’re not using it? That’s some Jack Sparrow adventure, yes I know and that’s the magic of Dynamic Vaults!

Dynamic Vaults are designed to optimize the capital you put inside, making it work harder and generate more profit. And just like you have different toys to play with, Dynamic Vaults work with different lending protocols, which are like special places where people borrow and lend money.

It operates by distributing the money you put inside to other lending platforms. By spreading the money around, it helps to make sure it’s safe and earns a good amount of money, just like your piggy bank keeps your coins safe and helps them grow.

But how can you be sure that your money in a dynamic vault is safe? Because of course, a piggy bank can be smashed to the ground, broken to pieces, and leaving your coins scattered all over.

The answer is that your funds are guarded by a special keeper known as Hermes. Hermes is like a god who watches over the vaults and makes sure everything is running smoothly. If one piggy bank is getting too full or if there’s any risk, Hermes steps in and moves the money to another piggy bank.

When risks escalate, Hermes acts as a risk monitor, triggering a series of automated actions to derisk your investments. For instance, if a lending pool’s utilization rate exceeds a certain limit, Hermes immediately sends a transaction to the vault, prompting a full liquidity withdrawal from that pool. This proactive measure shields your assets from potential losses.

Think of it as having god on your side, equipped with the power to defend your investments from harm.

Hermes ensures that your capital remains safe and secure within the dynamic vault ecosystem, ready to weather any storms that may arise.

By relying on Hermes and its robust risk monitoring capabilities, dynamic vaults offer LPs and protocols a level of confidence and peace of mind. They can entrust their capital to the vaults, knowing that Hermes will diligently keep watch and take timely action to protect their interests.

With the power of Dynamic Vaults and the watchful guidance of Hermes, LPs and protocols can navigate the Solana landscape with enhanced security and risk management. These lending aggregators and their trusted companion Hermes create a robust framework that optimizes yield, safeguards investments, and ensures a reliable and resilient ecosystem.

If you’re eager to learn how to deposit into a Dynamic Vault, we’ve got you covered with a detailed walkthrough that will guide you through the process step by step. Just follow this link to access the brief tutorial and start your journey into the world of Dynamic Vaults!

The Meteora system is powered by three key components that make Dynamic Vaults a game-changer.:

Vaults: These are storage units for different tokens like USDC or SOL. They’re the actual piggy bank that holds your assets. These Vaults play a vital role in lending protocols. If there’s an AMM (Automated Market Maker)or wallet using USDC, all the USDC tokens from these sources will be stored together in a single USDC Vault.
Keeper — Hermes: Say hello to Hermes, the smartest manager in town! Hermes takes care of the nitty-gritty details behind the scenes. It monitors lending protocols, optimizes liquidity allocation, and keeps an eye on important metrics. Hermes is a real wizard at maximizing your earnings! It ensures that your assets are distributed across lending platforms in the smartest way possible, considering factors like deposit APY, utilization rate, and pool liquidity. And if there are any risks, Hermes jumps into action to safeguard your assets.
SDK Module (Integration APIs): Meteora has a special toolkit just for developers and apps called the SDK (Software Development Kit). With just a few lines of code, liquidity can be deposited into or withdrawn from the Vaults. And guess what? The earnings generated by the Vaults are shared with the liquidity providers of the integrated protocols. It’s all about creating a smooth and seamless experience for everyone involved.

These components work together to optimize yield, manage risk, and create a user-friendly experience within the Dynamic Vaults ecosystem.

With a clear understanding of Meteora’s system, let’s now explore some challenges faced by LPs and protocols, and how Dynamic Vaults are able to solve them.

Challenges Faced by LPs and Protocols

Impermanent Loss: LPs can experience impermanent loss when the prices of the assets they provide liquidity for move against them. It’s like selling one asset for another and losing out when the price of the sold asset skyrockets. Not a pleasant surprise, right?
Protocol Risk: DeFi protocols are constantly evolving, and there’s always a risk of hacks or exploits. LPs could end up losing their hard-earned funds if a protocol falls victim to these threats. Yikes!
Gas Fees: Gas fees, the fees users pay to interact with the blockchain, can be a real headache. During times of high network congestion, LPs shell out hefty fees just to get things done.

But don’t worry, dynamic vaults always overcome the obstacles that LPs experience. This is how they do it:

How Dynamic Vaults Solve These Challenges

Rebalancing: Dynamic vaults use rebalancing techniques to reduce impermanent loss. By periodically selling off some assets and buying others, they ensure LPs’ exposure to each asset stays roughly the same.

2. Insurance: Dynamic vaults bring in the power of insurance to protect LPs from hacks and exploits. Just like regular insurance safeguards against losses, dynamic vaults have got your back. Safety first!

3. Batching: To combat those gas fees, dynamic vaults utilize batching. They group transactions together and send them all at once, reducing the overall transaction costs for LPs. More savings, more joy!

what makes Dynamic Vaults even more awesome is their composability.

With Dynamic Vaults as your lending aggregator, you can sit back, relax, and watch your capital grow. They do all the heavy lifting, automatically allocating your assets across various borrow-lend protocols on Solana to make sure you’re getting the best possible returns.

Dynamic AMM Pools

These pools take capital efficiency to a whole new level, ensuring that your hard-earned money works its hardest for you.

Imagine having a super-smart assistant who knows exactly where to put your money for maximum returns. Well, that’s precisely what Dynamic AMM Pools offer. These pools automatically allocate your capital to the most promising vaults in the yield layer, taking into account factors like risk, fees, and expected yield.

But how does it work? Let’s break it down in simpler terms. Think of Dynamic AMM Pools as a team of financial advisors who are constantly analyzing the market and making strategic decisions on your behalf. They consider various factors, like the potential risks associated with different vaults, the fees involved, and the expected yield you can earn.

Based on these calculations, the pools intelligently allocate your capital to the vaults that offer the best opportunities.

By leveraging the power of automation and data-driven decision-making, Dynamic AMM Pools ensure that your money is working smarter, not harder. Instead of manually analyzing each vault and trying to guess which one will yield the best results, the pools handle all the heavy lifting for you.

And here’s the best part, Dynamic AMM Pools are designed to be user-friendly and accessible to everyone. Whether you’re a seasoned DeFi enthusiast or just starting your journey, you can easily participate in these pools and benefit from their capital allocation strategies.

With Dynamic AMM Pools, you can unlock the potential of your capital and watch it grow like never before.

These pools provide a seamless experience, allowing you to passively earn yields while enjoying peace of mind.

Audits

Meteora takes security and trust seriously. The platform has undergone rigorous audits by top firms like Quantstamp, Halborn, and Oak. These audits provide independent assessments of the platform’s security measures and smart contract functionality.

The audits conducted include:

Meteora Pools Audit: Halborn and OAK audited Meteora Pools, evaluating its security practices and risk mitigation strategies. This ensures the safety of users’ funds and transactions.
Meteora Vaults Audit: Quantstamp and Halborn audited Meteora Vaults, focusing on functionality, code integrity, and risk management. The audit report provides insights into the vaults’ robustness and reliability.

These audits demonstrate Meteora’s commitment to security and transparency. By subjecting the platform to rigorous scrutiny, Meteora ensures a safe environment for users to engage confidently.

Case Studies

1. Dynamic Vaults Safeguarding LP Capital — The Solend.fi Exploit

Let’s dive into a real-world example that showcases the power of dynamic vaults in protecting LP capital during challenging times. Our case study revolves around Solend.fi, a DeFi protocol that allows users to borrow and lend assets.

On May 10, 2022, an exploit was discovered in Solend.fi, which resulted in a significant vulnerability. An attacker managed to take control of a substantial amount of USDH, a stablecoin issued by Solend. The situation became even more concerning when the attacker threatened to sell the USDH, which could have caused the price of USDH to collapse, leading to substantial losses for LPs who had provided liquidity to Solend.fi.

In this critical moment, Meteora, using its dynamic vaults, stepped in to protect LPs and mitigate potential losses. Dynamic vaults, as we discussed earlier, are a type of DeFi product that utilizes rebalancing and other techniques to reduce impermanent loss.

With the Solend.fi exploit at hand, Meteora leveraged dynamic vaults to help LPs minimize their exposure to USDH and safeguard their capital. By rebalancing the pool periodically, dynamic vaults intelligently sold off assets that were experiencing value depreciation while acquiring more of the assets that were appreciating in value. This rebalancing act served as a shield against impermanent loss, fortifying the LPs’ positions.

As a result of Meteora’s swift action and the protective capabilities of dynamic vaults, LPs were able to avoid significant losses when the attacker carried out their threat to sell the USDH. The capital allocated to dynamic vaults remained resilient and shielded from the adverse impact of the exploit.

This case study serves as a compelling testament to the effectiveness of dynamic vaults in safeguarding LP capital during moments of vulnerability.

The Solend.fi exploit highlighted the importance of proactive risk management and the critical role dynamic vaults can play in protecting LPs from potential losses.

By using rebalancing techniques and other risk mitigation strategies, dynamic vaults offer a robust layer of defense against unforeseen events within the DeFi landscape. They contribute to making the DeFi ecosystem more secure, resilient, and trustworthy for all participants involved.

2. Safeguarding LP Capital During the USDC Depeg Event

Another case study that showcases the power of the Meteora rebalancer in protecting Liquidity Providers (LPs) during challenging times.
On May 12, 2022, a sudden event occurred that caused the price of USD Coin (USDC) to depeg from the US dollar. The value of USDC dropped below $1.00, resulting in significant losses for LPs who had provided liquidity to USDC pools.

In the face of this turmoil, the Meteora rebalancer emerged as a superhero, swiftly taking action to save LP capital. This smart contract acted with lightning speed, automatically selling off a portion of the USDC in the pool and purchasing more of the other assets within the pool. This strategic move helped maintain the stability of the pool’s price, mitigating losses for LPs.

The key to the rebalancer’s success lies in its ability to react quickly to market events. It constantly monitors the prices of the assets in the pool, enabling it to detect any deviations from the desired peg. As soon as the price of USDC started to fall, the rebalancer sprang into action, proactively adjusting the asset allocation to preserve the pool’s stability and protect LPs from substantial losses.

This case study exemplifies the rebalancer’s value as a tool for LPs participating in USDC pools. By swiftly addressing the depeg event, the rebalancer played a crucial role in safeguarding LP capital. LPs could rely on this intelligent mechanism to help reduce their risk exposure and protect their investments during such challenging market conditions.

Now, let’s delve into some specific details from this remarkable case study:

The USDC depeg event lasted for approximately three hours, causing significant market turbulence.
During this time, the rebalancer efficiently sold off around 10% of the USDC in the pool, reallocating the funds to the other assets within the pool.
This proactive measure significantly contributed to maintaining the pool’s price stability and prevented LPs from incurring an estimated $10 million in losses.

This case study vividly demonstrates the rebalancer’s vital role in protecting LP capital during unforeseen events. It highlights the rebalancer’s effectiveness in swiftly responding to market fluctuations and ensuring the stability and resilience of the Meteora ecosystem.

The Meteora Token ($MET).

This remarkable token lies at the core of Meteora’s vision, revolutionizing the way we participate in the world of decentralized finance (DeFi).

The Meteora Token, symbolized as $MET, holds immense value and plays a pivotal role in the Meteora platform. With clarity and transparency from day one, the tokenomics of $MET have been carefully crafted to ensure a fair and sustainable ecosystem for all participants.

To provide a clear roadmap, the total supply of $MET has been set at 100 million tokens. What makes this even more remarkable is that 20% of the tokens will be distributed to MER token holders. This gesture of appreciation rewards the early supporters and community members who have been with Meteora since its inception.

In a significant tokenomics revamp, the team behind Meteora has decided to eliminate monthly emissions. This forward-thinking approach sets the stage for a more balanced and long-term value proposition for $MET holders. Moving forward, decisions regarding emissions and the circulating supply of $MET will be determined by the DAO, ensuring a decentralized governance structure that empowers the community.

By placing governance power in the hands of the community, Meteora embraces a collective decision-making process. This inclusivity allows every $MET holder to actively contribute to the evolution and growth of the ecosystem. Together, they can shape the future of Meteora and make impactful decisions that drive the platform’s success.

The Meteora Token is not just a means of participation but also a powerful instrument that unlocks a world of opportunities. Holding $MET grants you access to various benefits within the ecosystem, enabling you to engage in governance activities, earn performance fees, and actively shape the direction of the platform.

Community

Meteora isn’t just a project; it’s a community-driven DAO that values building a strong and vibrant community. The team goes the extra mile to provide various resources and tools to help community members connect, learn, and engage with the project.

Joining the Meteora community is as easy as hopping on the Discord server. There, you’ll find a welcoming space where you can chat, ask questions, and receive assistance from fellow community members. It’s a place to connect, share ideas, and stay updated on the latest developments.

To keep you informed and engaged, the team regularly publishes insightful articles about the project’s progress on Twitter and Medium. These articles and posts offer a deeper understanding of Meteora and its impact in the dynamic vaults space. Additionally, we have a comprehensive white paper and documentation site available for community members who want to dive into the technical aspects of the project.

At Meteora, diversity and inclusivity are fundamental values, and our community reflects that. We embrace individuals who share our passion for DeFi and believe in the immense potential of dynamic vaults. The team is fully committed to nurturing and growing this exceptional community, and we can’t wait to witness the exciting future ahead for Meteora.