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DeFi Decrypted: DODO explained

DeFi Decrypted: DODO explained

Explainers DeFi

13 Oct 2021

The Dodo bird is an infamous flightless bird that met its swift extinction when people settled on its native island of Mauritius. Dodo is also the name given to a new decentralized exchange that uses the Proactive Market Maker (PMM) algorithm to make DeFi liquidity more accessible, with a product suite across trading and aggregation, Initial DEX Offerings, liquidity pools, and mining.

Unlike its aviary cousin, the DODO DEX is taking flight and rapidly expanding its habitat across multiple island chains, not only escaping extinction but even thriving as it taps into the wider DeFi ecosystem.

What is DODO?

The DODO project is relatively new, with the development of the PMM algorithm and smart contracts beginning as early as April 2020. Following a comprehensive audit, DODO was pre-launched in August 2020, with participation from traders and liquidity providers to kickstart the project.

Initially, the project attracted a $600,000 seed round led by Framework Ventures. In September 2020, the team announced it had successfully completed an additional $5 million private sale funding round, led by Pantera Capital, Binance Labs, and Three Arrows Capital. The private sale round also attracted investment from several other prominent venture capital firms, cryptocurrency exchanges and trading firms that include Coinbase Ventures, Galaxy Digital, CMS Holdings, and Alameda Research.

According to the DODO team, that data from the launch campaign showed the DEX could provide better execution than Uniswap, with only 1/10th of the pooled capital while maintaining a 40% APR return for liquidity providers. At first, DODO focused on the Ethereum network but it soon began work on interchain development to extend access across several DeFi protocols. With an emphasis on scalability, flexibility, and versatility, DODO now brings ample liquidity across Ethereum, Binance Smart Chain, Polygon, Arbitrum, and HECO.

In particular, the PMM mechanism is what sets this DEX apart from the rest. The algorithm was developed entirely in-house and is an elegant, on-chain generalization of order book trading. It is adapted and optimized for operations on the blockchain and has proven itself to be highly performant and capital-efficient. The PMM pricing algorithm uses oracles to gather highly accurate market prices for assets. It then provides enough liquidity close to these prices in order to stabilize the portfolios of liquidity providers, lower price slippage, and negate impermanent loss by allowing arbitrage trading as reward.

Some of the other interesting features available on DODO include:

  • Crowdpooling: issue new assets at the lowest cost and create highly liquid capital pools through Crowdpooling. There are no restrictions on the initial price nor the ratio of funds and tokens supplied.
  • Liquidity pools: Create your own liquidity markets and customize market making strategies in an efficient, flexible manner, by adjusting parameters such as market mid-price, liquidity depth, and spread.

The DODO Token

There are actually two types of native tokens on the platform: DODO and vDODO. The former provides holders governance rights, crowdpooling, and IDO allocations, as well as trading fee discounts. The latter serves as a proof-of-membership in the platform’s loyalty program.

It should be noted that the vDODO token is minted by staking 100 DODO tokens, and are not transferable. In order to redeem vDODO back to DODO tokens, token holders would need to pay an 'exit fee' in vDODO tokens, which would be immediately distributed to all remaining vDODO holders.

The total supply of regular DODO is 1 billion, with 12 million currently in circulation. The token saw a swift uptake shortly after it began trading on the markets, gaining 12794% going from $0.066 to $8.51 within a month at the beginning of 2021. Gravity has since caught up with the DODO trading between $1.30 and $2.30 in the third quarter of the year.

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