DODO Project’s Market Making Algorithms Could Revolutionize Crypto Exchanges

  • the DODO project has been around for over two years now, with over $5 million in funding.
  • the DODO project aims to employ Marlet maker algorithms to change how decentralized exchanges work.
  • DODO claims to offer better prices and less risk of slippage than regular DEXs.

The crypto industry is changing rapidly, and you need look no further than decentralized exchanges (DEXs) to find proof of that. But while most DEXs are run by the concept of automated market makers (MA), the DODO project aims to go further and change the way DEXs work before they even become truly mainstream. It has over $5 million in funding and is backed by Binance, among others.

DODO is a DEX platform that promises traders “highly capital-efficient liquidity pools that support unique token delivery, reduce impermanent losses, and minimize slippage.” This promise comes from what the platform called a proactive market maker (PMM), a new type of algorithm that makes buy and sell decisions on the platform.


What makes DODO unique

On paper, DODO is just another DEx. But as mentioned above, the PMM is what differentiates this project from other DEXs like Uniswap. But to understand the difference between PMMs and AMMs, we first need to know how liquidity works in crypto transactions.

When you trade a particular crypto on an exchange, centralized or decentralized, the only way the trade can go through is if there is a buyer on the other end. On a centralized exchange, the company can provide liquidity through certain partnerships and more. However, DEXs are driven by smart contracts rather than companies.

This means that when you trade on a DEX, say Ether for USDT, the platform needs a pool of ETH-USDT liquidity. DEXs achieve this by allowing anyone to provide liquidity, and smart contracts define when liquidity can come into play. On regular DEXs, these smart contracts are called AMMs.

Thus, AMMs proceed with the market making process by pooling two crypto-assets, and the price of the transaction is determined by the amount of liquidity available on this pool. In turn, this means that the price you expected when you initiated a trade could be lower when the trade unfolds – a phenomenon known as slippage. In traditional stock trading terms, this will be akin to the price of a stock or asset changing in the time it takes your broker to execute the trade.

PMMs attempt to alleviate this concern by attempting to proactively adjust the parameters of a trade as it occurs. Basically, it is able to take into account the available liquidity in real time and adjust the relevant parameters of the trade to avoid slippage. They do this by creating pools of liquidity closer to the market price than MAs.

The DODO project claims that its PMMs can even be adjusted to account for external price oracles to avoid impermanent loss, which is a phenomenon that affects liquidity providers when the price of an asset changes between when it is deposited to provide liquidity and when it is withdrawn.

Tokenomics

The vDODO token, which is the native cryptocurrency of the DODO project, has three categories – traders, liquidity pool creators (LPC) and liquidity providers (LP). The tokens serve three functions – governance, crowd pooling and initial dex offering (IDO) allocations, and trading fee discounts on DODO.

The vDODO token is used to serve as proof of membership in the DODO loyalty program and can be minted at a fixed rate of 1 vDODO equal to 100 DODO. The platform also encourages long-term membership by exchanging vDODO tokens for DODO tokens using variable exit fees.

Governance-wise, vDODO token holders can vote on proposals with a single vDODO token equal to 100 votes.

At the time of writing, the token is trading at around ₹30.08 on
WazirX. the crypto exchange has also teamed up with the DODO Project for a giveaway that runs from March 1 through March 18. In one
blog postWazirX said the giveaway is worth ₹56 lakh and users can receive free tokens from the DODO project to perform various activities.

DODO Lite Version

The platform has also introduced a “lite” version of the DODO app, aimed at those new to the decentralized finance (DeFi) ecosystem. The DODO LITE app provides users with a clutter-free experience and makes transactions easier.

Disclaimer: This is a sponsored post in partnership with WazirX. Cryptos are unregulated virtual assets, which are not legal tender and are subject to market risk.

Sharon D. Cole