For any project launching a token on the Solana blockchain, selecting the appropriate liquidity pool mechanism is a foundational decision. This choice directly impacts initial costs, price stability, and the ability to attract and retain a trading community. Raydium, a leading decentralized exchange on Solana, offers three distinct types of pools: AMM, CPMM, and CLMM. Each is engineered for different strategic goals, from launching brand-new tokens to maintaining precise price stability for mature assets.
This guide provides a clear comparison of these three pool types, breaking down their operational principles, cost structures, and ideal use cases. By understanding their unique advantages, project teams can design a more effective and economically sustainable token launch.
Core Concepts of Liquidity Pools
Liquidity pools are the backbone of decentralized exchanges (DEXs). They are smart contracts that hold reserves of two or more tokens, enabling users to trade against this pooled capital automatically. Different mathematical models govern how these pools set prices and manage liquidity, leading to the various types available on Raydium.
1. AMM Pool: The Standard for Token Launches
The Automated Market Maker (AMM) pool is the most traditional model and is often the default choice for new token launches.
Key Characteristics:
- Mandatory Liquidity Lock: Creating an AMM pool requires burning its LP (Liquidity Provider) tokens. This action permanently locks the initial liquidity, which is a crucial trust-building mechanism for new projects.
- Flexible Price Discovery: Prices adjust algorithmically based on the ratio of tokens in the pool, starting from near zero and moving toward infinity. This allows for a true market-driven price discovery, ideal for assets without an established value.
- Broad Compatibility: AMM pools enjoy universal support across major Solana wallets and aggregators, ensuring maximum accessibility for traders.
Considerations:
- Lower Capital Efficiency: The simple constant product formula (x*y=k) leads to significant price slippage for large trades. The effective liquidity depth is often only 10-15% of the total value locked (TVL) displayed.
- Higher Upfront Cost: Setting up an AMM pool requires applying for and paying for a market ID on the OpenBook order book, adding to the initial expense.
Ideal Use Cases:
- Launching meme coins or community-driven tokens that need a completely open and permissionless start.
- Projects prioritizing maximum initial visibility and trader access over capital efficiency.
2. CPMM Pool: The Compliant and Enhanced Model
The Constant Product Market Maker (CPMM) pool builds upon the AMM model with advanced features tailored for more sophisticated projects.
Key Characteristics:
- Token 2022 Standard: CPMM pools natively support the Token-2022 program on Solana. This standard enables advanced token functionalities directly on the chain, such as transfer fees (for dividends or taxes) and confidential transfers.
- Dynamic Fee Tiers: Projects can select a transaction fee that suits their token's volatility, ranging from 0.01% for stablecoin pairs to 1% for highly volatile assets.
- Cost Effective: Creating a CPMM pool does not require burning LP tokens, significantly reducing the setup cost to approximately 0.4 SOL.
Considerations:
- While more efficient than AMM, it still operates on the same fundamental formula, so it does not offer the concentrated liquidity features of a CLMM.
Ideal Use Cases:
- Utility tokens, particularly in GameFi or socialFi, that implement transaction taxes or reward mechanisms.
- Projects seeking compliance features and looking to attract institutional market makers.
3. CLMM Pool: Precision for Stable and Anchored Assets
The Concentrated Liquidity Market Maker (CLMM) model represents a significant innovation, allowing liquidity providers to allocate capital within a specific price range.
Key Characteristics:
- Permissionless Creation: Anyone can create a CLMM pool without needing a market ID, eliminating that associated fee and barrier.
- High Capital Efficiency: By concentrating funds around the current market price, CLMM pools can provide up to 400x more effective liquidity than a standard AMM pool with the same amount of capital. This drastically reduces slippage for traders.
- Precise Price Control: Projects can set a very narrow price range (e.g., ±1% for a stablecoin), effectively pegging the asset's value and creating a strong price floor and ceiling.
- NFT-Managed Positions: Each liquidity position is minted as an NFT. This prevents chaotic, mass withdrawals from the pool and allows for more sophisticated reward and governance mechanisms.
Ideal Use Cases:
- Stablecoins, liquid staking tokens (LSTs), and any asset that requires a tight peg to another asset's value.
- Established projects aiming to build a deep liquidity "moat" around a specific price point through liquidity mining programs.
Comparative Analysis: AMM vs. CPMM vs. CLMM
| Factor | AMM Pool (Standard) | CPMM Pool (Enhanced) | CLMM Pool (Concentrated) |
|---|---|---|---|
| Creation Cost | High (Market ID fee + LP burn) | Low (~0.4 SOL) | Medium (No market ID fee) |
| Price Control | Fully Flexible | Limited (adjusted via fees) | Highly Precise (custom range) |
| Capital Efficiency | Low (10%-15%) | Medium (30%-50%) | Very High (70%-90%+) |
| Key Strength | Universal access & launch simplicity | Token-2022 compliance features | Maximum depth with minimal capital |
| Best For | Cold starts, meme coins | Utility tokens, taxed projects | Stablecoins, price-pegged assets |
How to Create a Liquidity Pool on Raydium
The process for setting up a pool is straightforward but requires careful consideration of the type you choose.
- Connect your Solana wallet (e.g., Phantom, OKX Wallet) to the Raydium platform.
- Navigate to the "Liquidity" section and click "Create Pool."
- Select your desired pool type: AMM, CPMM, or CLMM.
- Choose the two tokens for your trading pair and specify the initial amounts for each.
- For CLMM pools, you will define the price range for your liquidity.
- Confirm the transaction in your wallet. Note that creating an AMM pool requires a pre-existing market ID.
For a deeper dive into advanced configuration and strategy, you can explore more liquidity provisioning strategies.
Frequently Asked Questions
Q1: Which pool type is the cheapest to create?
The CPMM pool is generally the cheapest in terms of direct creation costs, at approximately 0.4 SOL, as it avoids both the market ID fee and the LP token burn required for AMM pools.
Q2: I'm launching a new token with no initial price. Which pool should I use?
The Standard AMM pool is designed for this exact scenario. Its flexible price discovery mechanism allows the market to determine the token's value organically from zero, making it the standard choice for new launches.
Q3: What is the main advantage of a CLMM pool?
Its unparalleled capital efficiency. By allowing liquidity to be concentrated around a specific price, it provides far greater liquidity depth than other models with the same amount of locked capital, minimizing slippage and stabilizing price.
Q4: Can I use the Token-2022 standard with any pool?
The CPMM pool has native support for the Token-2022 standard, making it the best choice if your project requires its advanced features like transfer fees or interest-bearing mechanisms.
Q5: Are LP tokens from all pool types the same?
No. LP tokens for AMM and CPMM pools are standard SPL tokens. However, in CLMM pools, liquidity positions are represented as NFTs, which allows for more granular management and prevents fungibility.
Q6: Can I switch my pool type after creation?
No, the pool type is immutable once the smart contract is deployed. Liquidity must be withdrawn from an existing pool and deposited into a newly created one of a different type.
Strategic Conclusion: Building a Liquidity Moat
Choosing a liquidity pool on Raydium is a strategic decision that extends far beyond technical setup. It is a core component of a token's economic design.
- Use AMM Pools for their simplicity and effectiveness in bootstrapping a new token's market from zero.
- Leverage CPMM Pools to incorporate advanced, compliant tokenomics like fees and dividends, appealing to a broader investor base.
- Employ CLMM Pools as a strategic asset to build a powerful "liquidity moat," dramatically lowering market-making costs and ensuring extreme price stability for pegged assets.
Understanding the distinct roles of AMM, CPMM, and CLMM empowers project teams to optimize their resources, enhance token stability, and foster stronger, more engaged communities.