DODOEx ($DODO): A Revolutionary On-Chain Liquidity Provider

DODO Exchange ($DODO) is a platform that supplies on-chain liquidity in order to support the Proactive Market Maker algorithm (PMM) to provide everyone with pure and contract-fillable liquidity on the blockchain.

Overview

The dawn of decentralized exchanges (DEXs) and decentralized finance (DeFi) brought with it automated market-making (AMM). Unlike in centralized exchanges, AMM doesn’t rely on buyers and sellers for a trade to take place. Instead, smart contracts sit at the center of the trade with liquidity pools providing the reserves.

Unfortunately, in the DeFi scene, the AMM approach has faced challenges as to how to address issues such as slippage and impermanent loss effectively. As a result, platforms such as DODOEx are using a fined-tuned formula known as proactive market maker (PMM) which provides minimum slippage and improved fund utilization. Here, we take a close look at DODOEx, its contribution to the DeFi world, as well as what makes it unique.

Background

DODOEx, founded by three veterans in the blockchain industry, who has huge influencing power in China’s DeFi Community – Mingda Lei, Qi Wang and Diane Dai.

Mingda Lei, he is the architect behind this new market-making algorithm for the protocol. He was a Physics PhD dropout from Peking University. He used to worked for a China-based DeFi project called DDEX as the key developer of the project. The second co-founder is Qi Wang. He is the founder of DOS Network, a China-based layer two oracle project. Before entering into the crypto industry, Wang used to worked as a software developer for firms like Pure Storage and Oracle. The third co-founder, Diane Dai, she started the first subscription-based WeChat channel that focuses on DeFi in China called DeFi Labs.

Apart from the influencing team, DODOEx is also backed by many prominent investors such as Framework Ventures, DeFiance Capital, Pantera Capital, Binance Labs, Coinbase Ventures, Alameda Research, SevenX Ventures and more.

What is DODOEx?

Simply put, DODOEx is a decentralized liquidity provider using a new market making strategy. Notably, the new algorithm differs greatly from the AMM approach common with popular DEXs and/or DeFi platforms such as Uniswap and Curve.Finance.

For example, instead of spreading funds uniformly over a price range, PMM allocates funds with close respect to market prices. One disadvantage of equally allocating funds is that only those funds with a close connection with the market price get utilized in trades. Therefore, in an AMM scenario, there’s a huge difference between the liquidity provided and the liquidity that is actually in use.

DODO Exchange
DODO Exchange (Image credit: DODO Exchange Website)

How DODOEx Uses PMM to Beat AMM

Compared to Uniswap’s AMM, DODOEx’s PPM has a better trading amount-vs-price curve. Why? Because, being a proactive formula, it reacts to the changes in the market price to effectively shift the price curve in a similar direction. Consequently, the section around the market price is considerably flat, ensuring sustained liquidity provision and utilization.

DODOEx-Proactive Market Maker
DODOEx – Proactive Market Maker (Image credit: “DODO: A Revolution in On-Chain Liquidity” Medium Article)

Furthermore, apart from shifting the curve, DODOEx unlinks the base currency from the quote currency in a trading pair. Interestingly, this results in less risk and allows liquidity providers (LPs) to use the token at their disposal.

For instance, if it’s an ETH-DAI trading pair, the LP has to deposit either ETH and DAI. Under these circumstances, DODOEx presents numerous advantages to traders and LPs

Advantages of DODOEx to Traders

  • Although the protocol is decentralized, DODOEx traders have enough liquidity close to what is offered by centralized platforms.
  • There’s a possibility of having price differences between other exchanges and DODOEx which can be commercialized by arbitrageurs.
  • Liquidations, auctions, and other on-chain activities powered by smart contracts can utilize liquidity from DODOEx.

Advantages of Using DODOEx as an LP

  • By unlinking the base and quote tokens, LPs can use any asset type at their disposal.
  • No minimum restrictions on deposits.
  • LPs share the network’s transaction fees.
  • LPs don’t incur price risks when depositing their own tokens.
  • They can use their coins to create trading pairs.

DODOEx’s Native Token ($DODO)

DODO is an ERC-20 token and forms DODOEx’s native currency. DODO is the platform’s governance token. DODOEx’s governance structure consists of three decentralized autonomous organizations (DAO); admin, risk control, and earn.

The admin DAO is responsible for overseeing all the decisions made on the DODOEx ecosystem. Being the administrator, it has a considerable influence on the other DAOs.

The risk control DAO, as the name suggests, deals with the system’s risk features. Earn, on the other hand, governs how incentives are shared on the platform.

DODO token distribution
DODO Token Distribution (Image credit: “Announcing the DODO Token and Initial DODO Offering” Medium Article)

DODO’s total supply is 1,000,000,000 tokens which are allocated to the core team (15%), investors (16%), initial liquidity provision (1%), operations/marketing (8%), and lastly, the DODOEx community takes 60%.

DODO’s Initial DODO Offering (IDO)

The IDO was held on 29 September 2020 on DODO Exchange platform. DODO Exchange has listed the DODO-USDT trading pair. 1% of the total DODO supply is locked in the DODO liquidity pool and the initial offering price is $0.10 per token.

Earning DODO: Staking and Mining

The DODOEx system provides two ways to earn DODO tokens; staking and mining.

Staking

This involves locking your present DODO token holding and acquiring more tokens in the process. This can be done by:

  • Accessing the exchange through app.dodex.io.
  • Connecting your wallet through MetaMask.
  • Click “mining” on the upper far right corner.
  • Select DODO.
  • Click stake (note that there’s no way to edit the stake or unstake amount. Therefore, you can either stake or unstake your entire DODO balance).
  • Confirm your option on the exchange and on the wallet.

Mining DODO 

It involves providing liquidity in any supported trading pair using the pool tab. To access the pool option,

  • Visit app.dodoex.io.
  • Connect your wallet through MetaMask.
  • Select “Exchange” from the top right.
  • Click on “pool” and select your preferred pair. Note that you can deposit any coin on the trading pair. For example, if it’s the ETH-UDSC pair, you can deposit either ETH or USDC.
  • Click “Deposit,” define the token amount you wish to deposit, and select “Confirm.”
  • Access your wallet to confirm the transaction after which you click the “mining” button on the top right corner.
  • Approve the transaction and confirm it in the popup window that appears. In effect, another approval is required since you are now dealing with DLP tokens allocated from depositing your cryptocurrency on the above steps.
  • In the last step, confirm and stake.

Core Components of the DODO Contract Framework

A set of smart contracts powers the DODOEx protocol. However, for optimal interaction, these smart contracts are divided into three core components. They include:

The Core – This holds all the ecosystem’s data and logic. It consists of the transparent proxy contract and the logic implementation contract.

DODO contract framework
DODO Contract Framework (Image credit: DODOEx ‘Smart Contract Framework’ Github)

The Entrance – The entrance contract helps in streamlining activities on the transparent proxy contract, which is associated with oracles and fine-tuning parameters. Consequently, it helps mitigate the losses for users.

The Helper – This section of the DODOEx ecosystem holds contracts that are meant to help remove the complexity of the platform away from its users.

Conclusion

The network’s next-generation liquidity provision algorithm ensures high fund utilization and ensures LPs don’t lose value between depositing and withdrawing, commonly known as impermanent loss.

In addition, DODOEx is beneficial to both traders and liquidity providers. For example, it provides enough liquidity for traders and LPs share a section of the system’s transaction. Also, DODO mining and staking enable investors to increase their token holdings.

Decentralised Finance (DeFi) series: tutorials, guides and more

With content for both beginners and more advanced users, check out our YouTube DeFi series containing tutorials on the ESSENTIAL TOOLS you need for trading in the DeFi space e.g. MetaMask and Uniswap. We also take a deep dive into popular DeFi topics such as Yearn.finance ($YFI), Balancer ($BAL) and ($COMP).

The DeFi series on this website also covers topics not explored in YouTube. For an introduction on what is DeFi, check out Decentralized Finance (DeFi) Overview: A guide to the HOTTEST trend in cryptocurrency

Learn about Yearn.finance ($YFI) and all its various hard forks and iterations:

For in-depth information other specific DeFi projects, check out our DeFi token guides:

Tutorials and guides for the ESSENTIAL DEFI TOOLS:

More videos and articles are coming soon as part of our DeFi series, so be sure to SUBSCRIBE to our Youtube channel and (for now) FREE weekly newsletter so you can be notified as soon as they come out!

The information provided in this article is intended for general guidance and information purposes only. Contents of this article are under no circumstances intended to be considered as investment, business, legal or tax advice. We do not accept any responsibility for individual decisions made based on this article and we strongly encourage you to do your own research before taking any action. Although best efforts are made to ensure that all information provided herein is accurate and up to date, omissions, errors, or mistakes may occur.

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