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Designated Market Makers (DMMs)

Melt is not a market maker. It is an infrastructure protocol. Independent professional market makers deliver liquidity through the DMM program.

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Responsibilities

  • Peg Maintenance — DMMs utilize arbitrage loops (buying on Melt/selling externally, or vice versa) to maintain price alignment with global reference prices
  • Depth Assurance — continuous bid/ask limit orders ensure standard retail trade sizes execute with negligible slippage

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The Arbitrage Mechanism

When Melt Asset prices deviate from oracle prices, DMMs are incentivized to correct them:
  • If QQQ trades at 2,010 while the oracle price is 2,000 → DMMs mint new QQQ at $2,000 (plus fees) and sell on the order book, forcing the price down
  • If QQQ trades at 1,990 while the oracle price is 2,000 → DMMs buy QQQ on the order book and redeem for the underlying at $2,000, forcing the price up