Some comments about market making are in order, lest there be confusion.
Generally speaking, the utility of each additional unit of liquidity does not increase linearly. To see this point, consider an asset for which daily volume averaged only $1k. For this asset, it doesn’t really matter whether it has $1M of liquidity or $100M of liquidity; it will make very little difference to the execution price that traders get. The trade sizes are so small that, beyond a certain point, additional liquidity doesn’t meaningfully reduce slippage.
This is what’s happening with Lifinity’s mSOL-USDC pool. There is an overabundance of liquidity, and as a result we had to adjust the pool’s concentration to protect LPs from the excessive liquidity that we were providing that opened LPs up to greater risk of impermanent loss than is necessary. (However, note that manually adjusting the concentration was never our long-term plan, only a temporary solution.)
We used to provide about $1m of liquidity at 100x concentration. Solend subsequently deposited $1M, and we now provide about $2M of liquidity at 50x concentration. As a result, we currently provide approximately the same level of liquidity at the current price as before Solend’s deposit. To put it differently, Solend’s deposit is not increasing the utility of mSOL in the form of deeper liquidity at the current price, nor would any deposit beyond the pool’s target liquidity ($1M), as we would once again simply reduce the concentration to make the level of liquidity provided match what we used to have before additional liquidity was deposited.
For this reason, although dynamic fees disincentivize deposits, it does not affect the level of liquidity provided for mSOL, which is what really matters. Any confusion likely stems from how this is not the case on all other AMMs, where more deposits = greater liquidity provided.
Regarding the screenshot of my comment from a different thread, it sounds as if @nope is claiming that it was the key comment that led to proposal 16 failing to pass. It should be clear to anyone who has read through the thread that this is not the case. Indeed, the topic was not even the crux of the discussion, which centered around the pool being closed and external LPs not being able to access its MNDE rewards (both of which are no longer true).
My comment was intended to convey that Lifinity would not make an ad hoc change to the mSOL-USDC pool’s fee structure, as that’s what was being implied by the person I was responding to and the discussion was centered around that pool alone, not how Lifinity functioned as a whole (again, I encourage everyone to read it in context if they haven’t already). Dynamic fees for all our pools were planned from over 6 months ago, even before our IDO. They were announced in a Medium article, are explained in our docs, and I have always freely answered any questions people had about them.