Baseline Market Maker (BMM)

The Baseline Market Maker (BMM) is an on-chain algorithmic market maker that knows how much supply is in circulation. This awareness allows BMM to allocate liquidity intelligently: supporting price discovery when appropriate, and protecting the floor when needed.

Why BMM Matters

BMM enables something traditional AMMs cannot: a guaranteed floor price that coexists with healthy price discovery.

Traditional AMMs use all their reserves for trading. This means:

  • Tokens can go to zero
  • Deep liquidity gets quoted against vanishing float (the "low-float, high-FDV" problem)
  • Value leaks out as the AMM keeps deploying liquidity even when it should protect reserves

BMM solves this by splitting reserves into two categories: backing (for floor protection) and buffer (for price discovery). As circulating supply changes, BMM automatically adjusts the balance between the two.

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Key Insight: By knowing circulating supply, BMM allocates liquidity intelligently while ensuring the floor price is always respected.

How BMM Works

BMM splits reserves into backing reserves (blue) and buffer reserves (green):

Reserves Curve showing backing and buffer reserves
  • Backing reserves guarantee every circulating token can be redeemed at the floor price
  • Buffer reserves enable price discovery above the floor

As tokens enter circulation, the buffer depletes and backing grows. This transitions the market from price discovery to price protection, ensuring the floor is never breached.

The Math

Total reserves split into backing and buffer:

y=ybacking+ybuffery = y_{backing} + y_{buffer}

Backing reserves ensure floor redemption:

ybacking=Pblv⋅cy_{backing} = P_{blv} \cdot c

Buffer reserves follow a power-law curve based on inventory ratio:

ybuffer=K⋅(xc)2y_{buffer} = K \cdot \left(\frac{x}{c}\right)^2

Where xx is pool inventory, cc is circulating supply, PblvP_{blv} is floor price, and KK is the curve invariant.

Benefits of BMM

  • Guaranteed Floor: The floor price is always respected. BMM transitions from price discovery to price protection as needed.
  • Intelligent Liquidity: Liquidity allocation is based on circulating supply, not just pool reserves.
  • Concentrated Liquidity: BMM concentrates liquidity near the current price rather than spreading it thin across all price levels.
  • Programmatic and Transparent: Deterministic rules encoded in smart contracts.
  • No External Dependencies: BMM operates fully onchain 24/7 without oracles or centralized market makers.
Baseline Value (BLV)Fees