DODO: Capital-Efficient Decentralized Exchange

Nick Sawinyh on 24 Nov 2020

With Diane Dai, we discussed AMM’s exchanges market, Proactive Market Maker algorithm, and what’s coming next in DODO 2.0.

Disclosure: This article was sponsored by DODO.

Hello! What’s your background, and what are you working on?

My name is Diane Dai, and I’m the Co-Founder and Chief Marketing Officer of DODO. I got into crypto when I started working at in 2017 when the decentralized exchange space was still in its infancy. Over the years I learned a lot from the pioneers in the industry, and now I’m often described as “one of the most prominent” DeFi thought leaders in the Chinese community. Today, my WeChat blog “DeFi Labs” is considered essential reading by many DeFi enthusiasts in China.

DODO is an open, capital-efficient decentralized exchange that offers traders low slippage and low costs while giving liquidity providers single-token exposure. Users can swap between two tokens listed on DODO or deposit their tokens into DODO’s liquidity pools to earn fees and rewards.

What’s DODO backstory?

I’m a heavy Uniswap and AMM user, and I love how decentralized exchanges are non-custodial and censorship-resistant. But I noticed they all had problems with impermanent loss. I wanted to leverage oracle technologies to reduce it, as well as to lower slippage and increase capital efficiency.

That said, my algorithm had to be fairly simple and with much lower gas costs than normal. To achieve this, I assembled an incredible team of blockchain entrepreneurs, engineers, and professionals in April of 2020, including:

  • MIngda Lei, our CEO, who was an integral member of the developer team and an expert in Solidity and DEX theory.
  • Qi Wang, our COO, who founded DOS Network (a layer 2 decentralized oracle service provider) and has experience working at Bay Area tech companies such as Oracle.

As a team of serious dreamers and builders, we worked at breakneck speed and finished our Proactive Market Maker (PMM) prototype in about a month. When we did a backtest for our PMM with historical BTC price data from 2018 to 2020, we discovered remarkable LP profits.

This early discovery affirmed our belief in the project’s feasibility. Once we were able to produce demonstrable results, we secured $600K in seed funding from well-known crypto VC firms Framework Ventures and DeFiance Capital and from a variety of angel investors including Compound founder Rob Leshner and CoinGecko founder Bobby Ong. We received a further $5M in funding through a private sale round from Pantera Capital, Binance Labs, Galaxy Digital, and Coinbase Ventures, among others.

This was the beginning of the process of creating an efficient decentralized exchange based on three core tenets: openness, security, and community.

What went into building the DODO?

We went from just a concept to releasing on the Kovan testnet in just a month, but it took an additional few months to complete more testing, audits, and backtests to ensure DODO’s security and sustainability.

Security was especially important for us, so much so that we hired PeckShield Inc. to do a comprehensive smart contract review. Later we also hired Trail of Bits to do some additional scrutiny of our product. Despite these efforts, our commitment to improving DODO’s security hasn’t faltered, and we therefore welcome our community members to find and get rid of vulnerabilities using our open source, forkable Github repo.

In the meantime, DeFi exploded and started going mainstream. The popularity of yield farming, decentralized exchanges, and open finance protocols grew like never before, but exit scams and fraudulent behaviors have grown too. These incidents served as a warning to us to emphasise honesty and integrity in everything we do. Despite these challenges, I love the constant innovation, all of which helped our team grow and mature.

DODO is fortunate enough to have many “power users.” Plenty of Twitter crypto influencers and media personalities covered the rise of DODO, for which we are extremely grateful. In terms of inspiration we owe a lot to Uniswap, an important pioneer in the DEX field. Despite all this, our progress was not without its difficulties. Many members of our team are based in China and, while we have many Chinese users, it is not easy to expand our user base and reach out to the Western community. The effort to bridge the gap between East and West is part of DODO’s core mission statement. Our niche is onboarding professional market makers on-chain, and we’re making good progress in developing this aspect of our product, including by forging strategic partnerships with key players in the field.

The DODO team now consists of around 15 full-time employees, and we’re still growing! Our team is flexible, globally distributed, and passionate about success in decentralization and finance. Our long-term vision is to give governance of the platform and protocol to the community via three decentralized autonomous organizations (DAOs): Admin DAO, Risk Control DAO, and Earn DAO. Our goal, simply stated, is to have as much decentralization as possible and give the on-chain asset pricing power back to our community.

What’s your business model?

Our main source of income is currently the transaction fees we charge for each trade completed on DODO. They’ve been a staple of our product since the early bird campaign and the initial launch, when they garnered significant interest from our users for their efficiency and simplicity. Many also praised our fees for being unbeatable: traders get the best “bang for their buck” on DODO.

Our main competitors are AMMs like Uniswap. DODO stands out as it features reduced impermanent loss, single-token exposure, and lower gas cost. Rather than obsessing with playing “catch-up” with our competition, our current focus is building up the DODO community and making more product updates to make the platform itself better. We’re also seeking to capture more of our target market, which consists primarily of crypto traders and liquidity providers.

We’ve been very successful in terms of trade volume, placing in the top 10 market makers in terms of Total Value Locked (TVL)-to-volume ratio by far. Despite this, we still have a lot of room to grow in terms of absolute total value locked (TVL) and daily volume.

What’s your position on the regulatory landscape today?

We believe that finance can be free and resistant to any censorship, and we see the greatest potential for this in the ideals of blockchain technology. Its non-partisan, objective, and fully transparent nature makes it the ideal candidate for the future of finance. As it stands, DeFi is still in its infancy, and it remains to be seen how various authorities and jurisdictions will regulate this space. Our team is actively monitoring the regulatory landscape in the DeFi space and is ready to dynamically adapt to meet the needs of our customers.

What are your goals for the future?

In the immediate future, we plan to raise our profile and increase users and trade volume, the latter being the most important metric for measuring the success of a DEX. DODO version 1.5 is slated for late December, which will feature a revamped design interface and smart routing, enabling swapping between arbitrary assets even if they are not listed on DODO. DODO is also in the process of onboarding professional market makers to bring their strategies on-chain, as they need an entry point to market make on decentralized platforms.

Our next milestone is DODO version 2.0, planned for release in the first quarter of 2021. Its most notable feature will be the permissionless initial DODO offering (IDO) mechanic,which will significantly reduce the barriers to entry for prospective token issuers.

As mentioned previously, our ultimate vision is full decentralization. Our plan is to continue to innovate, hire the best talent in DeFi, promote thought-provoking discussion through media appearances, and gather constructive feedback from our community. Here at DODO, we strive to satisfy our users’ requirements through serious innovation and a relentless drive for perfection. I believe we are fully equipped to tackle any obstacles that we may encounter by applying our core principles.

What are your future thoughts for the DeFi market?

I’m very excited about DeFi and believe it has a bright future – the total TVL breaks records every week! Cryptocurrencies in general will definitely play an increasingly important role in our lives as time goes on. They’ve already entered mainstream consciousness and many have become household names. I recently participated in Shanghai International Blockchain Week and was pleasantly surprised by how much attention it got. The future is bright!

Where can we go to learn more?

DeFi is coming. Don't get left behind

About the author
Nick Sawinyh
Nick Sawinyh is a crypto entrepreneur based in LA. He founded DeFiprime in 2019 to offer information on emerging DeFi ecosystem. He owns small amounts of different cryptocurrencies.

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