No more Impermanent Loss?

lbi-token (74)in LeoFinance • 3 years ago

Every week I try to find an interesting project to write about ... and this week is not different. And I think this is quite an interesting token. Not in the last place because it doesn't have that much exposure right now. There is a lot of growth possible for this project. Much depends on the team, and how they will work on their project. But my feeling tells me that for this project there could be a very bright future ahead.

So let's dive in the DODOEx

What is Dodo?

DODO is a decentralized exchange for cryptocurrencies. This is of course not the only DEX where you can buy your tokens and coins. The special thing about DODO is that this platform uses the Proactive Market Maker (PMM) as its algorithm. And this is not just any algorithm.

The PMM is built on both the Ethereum and Binance Smart Chain blockchain. With this PMM, the team behind DODO wants to put an end to the impermanent loss that other DEXs suffer from. This also improves the liquidity of the platform.

Other DEXs often use the Automated Market Maker (AMM). However, the team behind DODO believes that this algorithm is not optimal and causes many problems. This resulted in the Proactive Market Maker, which should solve these problems.

DODO team and partners

The team behind DODO launched the project on February 17, 2021. This team consists of three founders and several team members. The team members have a lot of experience in the blockchain world as they are entrepreneurs, engineers and professionals in this field.

The DODO team consists of:

Diane Dai (co-founder and CMO). She has been active in the world of cryptocurrency since 2017 and has a lot of experience with Decentralized Finance (DeFi).
Mingda Lei (CEO). In the past, Mingda was a member of the DDEX.io team and has a lot of experience with Solidity and DEXs.
Qi Wang (COO). Qi founded DOS Network and gained experience at both Bay Area and Oracle. These are both big companies within the IT world.

Here are some of DODO's partners:

Pantera Capital (California)
Binance Labs (San Francisco)
Three Arrows Capitol (Singapore)
Coinbase Ventures (US)

What is DODOEx?

When you want to buy crypto coins and tokens, you can use the DODEx. This is DODO's decentralized crypto exchange. DODEx is built on the Ethereum blockchain, just like many other crypto projects. This has many advantages. This blockchain is very well-known and highly developed, which means that there are many possibilities. However, Ethereum also has drawbacks. Consider, for example, the high transaction costs, which make it difficult for DODO to recruit users when they spend hundreds of dollars in transaction costs.

DODEx offers different types of liquidity pools. Users can start such a pool themselves. These pools are created through smart contracts, which are of course very popular on the Ethereum blockchain.

An exchange can only do its job when there is enough liquidity. This applies to both central and decentralized exchanges. That is why DODOEx will also have to obtain enough liquidity to allow users to buy and sell their tokens and coins for the best price. The PPM algorithm allows them to do this with the least slippage and no impermanent loss.
The difference between Proactive Market Maker and Automated Market Maker can be clearly shown in a chart like the one below. To be clear, UniSwap uses the AMM algorithm, while DODOEx uses the PMM algorithm. Since the algorithm, as the name implies, is proactive, the price moves in the same direction as the market price when something changes. The curve is therefore fairly flat around the market price. As a result, the liquidity is better utilized, and there is less impermanent loss compared to UniSwap.

Benefits of DODOEx for crypto traders

When you are a crypto trader, there are plenty of advantages to consider when using DODOEx:

Crypto traders have about the same liquidity on DODOEx as on a centralized exchange. And that while DODEx is just a decentralized crypto exchange.
Enough liquidity can be provided by DODOEx to perform various activities powered by the smart contracts. This ensures that the platform can be used optimally.
It is possible to convert price differences into profit when a difference in price arises between DODOEx and other exchanges. With other DEXs this would result in impermanent loss.
Benefits of DODOEx for Liquidity Providers (LP)

There are also plenty of advantages of DODOEx for liquidity providers (LP):

No minimum restrictions on depositing liquidity.
Lower transaction costs because they are shared by the network.
LPs do not risk losing money when they deposit tokens.
It is possible to set up new trading pairs with the coins depositing LPs. This is because as an LP you can also use the coins of a trading pair separately.

How does the DODO exchange work?

It is now clear to you what DODO is. But how can you actually use the exchange? That's not difficult at all. This is because the exchange works for the user like any other exchange. In addition, DODO has also opted for a simple user interface, so no major problems to expect here.

Although the front of the exchange looks like almost any other exchange, there is a big difference on the back. DODO offers their tokens and coins on a decentralized exchange. Yet the way they do that is almost the same as that of a centralized exchange, such as Binance.

The PPM algorithm ensures that it is possible to add only one token of the trading pair to a pool. This is completely different from a DEX that uses the Automated Market model. There you would need both coins/tokens of the trading pair, which can cause the impermanent loss.

But how does DODO get the prices of the coins and tokens? These are brought in through the Chainlink oracle. This happens in real time. As a result, the stake for the pool changes when the price communicated by the Chainlink oracle changes. So you can trade at all times based on the current market value of a particular token or coin.

DODO Core Features

DODO has all the basic trading, staking and pooling features you would expect from a DEX. However, there are also four unique features that you won't find anywhere else.

These are the main features of DODO:

DODO Vending machine - Allows you to set up your own liquidity pool.
DODO Private Pool - Similar to the DODO Vending Machine, although the Private Pool has more features that allow it to be used by professional market makers.
DODO NFT Vault - Here you can set prices and set up a liquidity protocol for NFTs.
Crowdpooling - Crowdpooling allows you to raise money with a pool. This ensures extra liquidity in the pool, which ensures a better functioning of the market mechanism.

The DODO Token

This project also has its own token. The token is available as a BEP-20 and ERC-20 token. That means that the tokens can run on the Binance Smart Chain and Ethereum. Not very long ago (February 2021) vDODO was released. This is the second token of this project.

The total supply is fixed at 1 billion DODO tokens. At the time of writing (July 2021), about 11% of the total stock is already in circulation. This means that many more tokens will be added in the future.

There are crypto traders who would say that it is not favorable for the price. The greater the supply, the lower the price will generally be. However, this is not always the case. We also cannot predict how great the demand for the token will be in the future. So do your own research on the token before you buy it.

Conclusion

I'm sure we all know by now, that there are a lot of different crypto exchanges these days. Central exchanges such as Binance and Coinbase are currently the most used by crypto traders. However, decentralized exchanges are also on the rise. UniSwap and SushiSwap are far ahead of the competition in this regard.

These decentralized exchanges occasionally suffer from impermanent loss and the slippage that users have to set. This is partly due to the Automated Market Maker (AMM) they use. DODO seems to have put an end to this. They do this by means of the Proactive Market Maker (PMM) algorithm.

It's an interesting project that doesn't have much exposure at the moment. For example, most people who choose a DEX are more likely to go for UniSwap. Nevertheless, there is a chance that DODO will become even bigger than the already known DEXs in the future.

However, no one knows if and when this will actually happen.

There is a lot of competition out there. It seems as if a new crypto exchange is added to the market almost every week. More than reason enough for the team behind DODO to give their best to eventually become the most used DEX in the crypto world.