CoinEx Institution: Research Report on DODO, A Decentralized Trading Platform Based on Proactive Market Maker (PMM) Algorithm
I. Project background
DEX has ushered in exponential growth since the summer of 2020. Automated market maker (AMM) platforms represented by Uniswap have become the mainstream choice in the market, but users have also suffered the impermanent loss while providing liquidity. Due to the subsequent risk of volatility, the value of assets in hand will shrink invisibly.
The possible risks of AMM have inspired DeFi’s enthusiasm for innovation. The decentralized trading platform DODO has innovatively proposed a next-generation solution for liquidity supply—the proactive market maker (PMM) algorithm. It reduces impermanent losses and holding risks, and realizes the flexible market making and efficient asset issuance of DEX. PMM is also the new generation of on-chain liquidity solutions proposed and implemented by the DODO team for the first time.
DODO's innovative ideas have soon attracted the attention of the market. The seed funding round was led by Framework Ventures, which focuses on investment in the DeFi field, and DODO was also the first DeFi project in the country to receive its funds. Binance and Coinbase followed in the private placement.
On February 28 this year, DODO’s weekly trading volume hit a historical record of US$470 million. As a superstar in the DeFi project in 2020, DODO was once popular with venture capital. It boasts a "veteran development team with experience in some well-known projects" and "countless investors (both iinstitutions and individuals), represented by Binance with the investment of US$5 million."
II. Project profile
Project profile
DODO is a new on-chain liquidity provider that acts much like Uniswap, Bancor or Balancer. The key difference is DODO uses an alternative approach to automated market making. Referred to as being a Proactive Market Maker (PMM), DodoEx uses price oracles to copy the behavior of real human traders and market makers. The algorithm checks the prices of assets, allocating funds to proactively increase liquidity near the market price, thus making capital usage more efficient. At the same time, liquidity providers are allowed to unilaterally deposit assets to make the market.
To put it simply, DODO is a decentralized trading platform supported by the PMM algorithm. Liquidity providers can deposit a single asset instead of both crypto assets in its highly capital-efficient liquidity pool, which reduces impermanent losses and minimizes the slippage of traders. DODO also provides SmartTrade, a decentralized liquidity aggregation service that can compare various liquidity sources and quote the best price between any two tokens.
At its core, the PMM uses price oracles to guide prices, copy the behavior of real human market makers, and allocates funds to proactively increase liquidity near the market price, thus ensuring as good liquidity as a centralized exchange. This means that the PMM features more efficient capital utilization and lower slippage, while providing more favorable prices.
In general, the PMM algorithm is to compress the order book, which ensures on-chain liquidity cheaply and flexibly supports various modes. The PMM is defined as a universal liquidity framework, and, through the modification of parameter settings, a variety of use cases are realized. If we compare the AMM to a calculator with some functions such as reserve, which is simple and easy to use, then the PMM is a general-purpose computer with the calculator function. The PMM algorithm can degenerate into the AMM through parameter settings. On the computer of PMM you can do a lot of things that you can’t do on AMM, such as playing games, listening to songs, and sending emails.
- About the token
Code: DODO
Official website: https://dodoex.io/
Listing time: September 2020
Type: ERC20
Contract address:
0x43dfc4159d86f3a37a5a4b3d4580b888ad7d4ddd
Total supply: 1 billion
Token distribution:
Token unlock: DODO mined will be linearly unlocked within 6 months
Mining mechanism: Yield farming and transaction mining (the first trading user every 10 blocks will be rewarded with 100 DODO)
Token usage:
(1) Governance
With DODO, users can create proposals and vote on proposals to govern the platform; DODO holders can also obtain IDO quotas to participate in crowdpooling and IDO events on the platform;
(2) Staking
By staking DODO, users can obtain additional DODO rewards;
(3) Discounts on transaction fees
DODO holders can enjoy fee discounts when trading on the platform;
(4) Minting vDODO
Users can stake their DODO to mint vDODO for additional membership rewards from transaction fees.
Listing exchanges: CoinEx, Gate, MXC, Hotbit, and Uniswap
III. Project functions
SmartTrade transaction aggregation
DODO is built on Ethereum and BSC, allowing transactions between two arbitrary tokens on the same network, while SmartTrade can intelligently find the best order path from the aggregated liquidity resources, thereby providing traders with the optimal price.
- Crowdpooling
This is a fair way of distributing tokens and launching a liquid market. Crowdpooling is designed to eliminate the chance of rush runs or interference by robot programs.
- Fund pool
The fund pool enables liquidity providers to flexibly create and manage their own on-chain market-making strategies in a 100% permission-less, non-custodial manner.
- Mining
DODO platform users can obtain DODO rewards by engaging in yield farming (for liquidity providers), transaction mining (for traders) and Combiner Harvest mining (for creators of the fund pool).
In 2021, DODO released the V2 version with the crowdpooling function to further ensure fairness in the token listing.
IV. Marketing and communities
https://twitter.com/BreederDodo
Medium
https://medium.com/@dodo.in.the.zoo
V. The financial status of the team
In its two funding rounds, DODO has received investment from many well-known institutions. DODO secured US$5 million in the private placement jointly led by Pantera Capital, Three Arrows Capital and Binance Labs with involvement from Coinbase Ventures. Backers in the seed funding round, i.e. Framework Ventures, DeFiance Capital, and SevenX Ventures, also added investment. DODO’s backers also include professional market-making institutions CMS Holdings and Alameda Research as well as well-known funds like Galaxy Digital, Shata Capital, Primitive Ventures, Origin Capital, D1 Ventures, IOSG Ventures, LongHash Capital, DeFi Capital, and The Force Partners Wait.
VI. Hacker attacks
As DODO later claimed, the main reason for this attack was that the initialization function of the crowdpooling contract did not prevent repeated calls, which led to hackers reinitializing the contract and then attacking the fund pool through the lightning loan. At present, DODO has recovered US$3.1 million and resumed crowdpooling within a week.
References:
Walking Notes: The Cornerstone of the Next Generation of DeFi: Cheap, Abundant and Shareable On-chain Liquidity
Chain News: DODO Co-founder Leda Xiong: To Be A Digital Currency Venture Board for 100 million People
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