DODO & Wootrade Strategic Partnership Announcement
As part of our bid to onboard liquidity strategies on-chain, the DODO team is proud to announce a strategic partnership with Wootrade, a leading network dedicated to providing diversified liquidity and trading infrastructure. Wootrade will play a vital role in supporting the DODO platform by minimizing slippage for trades of all sizes.
Wootrade COO and Co-Founder Ran Yi said:
“DODO has a strong team with a long history in the DeFi space. They make an ideal partner to work with when exploring decentralized exchanges connecting to Wootrade as part of our mission to utilize liquidity more effectively. With the number of decentralized markets being established, this is an intriguing new area to explore, as we attempt to join the efficiency of centralization with the trustless reliability of decentralization.”
Diane Dai, DODO’s CMO and co-Founder, is equally delighted to be collaborating with Wootrade. She said:
“Wootrade and DODO’s partnership can be a catalyst to broader decentralized exchange (DEX) innovation and adoption. We are confident that by onboarding Wootrade, DODO can prove to other market makers that DODO is the ideal platform for them to take advantage of the synergy between DeFi and centralized liquidity.”
Challenges of Market Making on AMMs
Professional market makers are a mainstay on centralized exchanges (CEXs), where they quote both buy and sell orders and profit from the orderbook’s bid-ask spread as traders, also referred to as takers, take their orders. In order to profit from such activities, it is essential that makers are able to post and cancel orders constantly as they evaluate and respond to changes in a myriad of market factors. With the emergence of automated market makers (AMMs), however, decentralized exchanges have largely abandoned the orderbook system and opted for a design where anyone can trade at any time by directly interacting with liquidity pools themselves. This new paradigm has presented several challenges for professional market makers.
For DEXs, it is a no-brainer to enlist the help of professional maker makers, as they provide deep liquidity to enable competitively priced trades. But from the market makers’ perspective, liquidity pools are a completely different beast. Allowing liquidity pools to be set up by anyone is a DeFi staple first pioneered by Uniswap and Balancer, but these AMM designs employ conservative market making strategies that are sometimes too rigid to meet the dynamic needs and requirements of different market makers. For example, makers on other AMM platforms are forced to deposit their token assets in one pre-defined ratio (e.g. 50:50 on Uniswap) and/or accept the transaction/swap fee rates configured by the pool creators. Instead of actively “making the market” like they do on CEXs, market makers are relegated to a role of passive token depositors, unable to apply and execute their own market theses.
Moreover, these strategies are often less capital-efficient due to their constant product pricing formula, xy=k. The formula stipulates that capital is allocated uniformly across the price curve, so only a small amount of capital is placed near the market price and the resulting slippage is high. This means that market makers often have to take on significant risks and could lose large amounts of money if price movements became too volatile.
Market Making on DODO: Flexibility and Freedom
In contrast, DODO’s proactive market maker (PMM) algorithm was designed with flexibility and customizability in mind, which drastically improves the market making experience similar to that on CEXs. Each liquidity pool on DODO is defined by a set of parameters that can be fine-tuned for optimal performance. The DODO team conducted extensive research with professional market makers and learned that the ability to change the depths and risk exposure real-time in response to market movements is highly sought after. On DODO, this is achieved by adjusting the risk/liquidity parameter, the mid market price of the assets traded, and/or the transaction fee rate. You can read more about DODO’s parameters here. With these parameters, countless permutations are possible and makers can ply their trade on DODO to their heart’s content.
DODO is entering uncharted territory in the DEX space by giving market makers ample freedom to devise and manage their tailor-made liquidity solutions on-chain. If they can sustain profit over a period of time, they can also opt to open their pools to retail LPs, who will then be able to contribute liquidity to these pools and receive their share of market making profits. This feature has the potential to be immensely beneficial to all parties involved. Traders will enjoy lower slippage and more options for the same trading pairs. Liquidity providers will have access to a more diverse array of pools. The DODO platform will become more stable and sustainable in the long run.
Official Links:
Wootrade : https://woo.trade/
DODO: https://dodoex.io/
#justDODOit!
Welcome to the DODO Zoo!
FAQs: https://dodoex.github.io/docs/docs/
GitHub: https://github.com/DODOEX
Telegram: t.me/dodoex_official
Twitter: https://twitter.com/BreederDodo
Discord: https://discord.gg/tyKReUK
