DODO DEX announced the launch of DODO Crowdpooling

DODO DEX announced last Thursday, April 22, through its Twitter account, the launch of DODO Crowdpooling with Ethersocks. As the company explained, Crowdpooling is designed to provide equal opportunities for all participants, and it is always nice to see our vision unfold.

The company indicated that there are three main methods of offering liquidity on decentralized exchanges (DEX) today:

• Peg curve: The price of a token asset increases according to a preset price curve, known as a peg curve, as the supply of tokens increases. However, what always happens is that the degens are mimicked in the contracts and get ahead of everyone else, obtaining tokens at obscenely low prices. This advance leads to large price discrepancies among participants. As a result, speculators can generally value genuine investors who believe in project visions under this scheme.

• AMM coupled with yield agriculture: Many token assets are issued on AMM platforms, which almost always require liquidity to be contributed by 50% of base tokens (the tokens being issued / sold; the demand side) and 50% of trading tokens (tokens in which the price of the asset is denominated, usually ETH and stablecoins; the supply side). But the reality is that most project teams simply cannot afford to lock in the supply-side liquidity necessary to sustain the market for extended periods. In other words, they do not have enough ETH (or stablecoins) to keep the market liquid enough. Therefore, group 2 yield farming, a type of liquidity farming that requires liquidity providers to be exposed to the tokens being issued, is often used to boost supply-side liquidity. However, this combination of MMA and yield farming is essentially an act of “renting” liquidity by constantly inflating the token offering. Yield producers are mercenaries who have no vested interest in the projects themselves and will not hesitate to “grow and toss,” creating almost constant selling pressure in secondary markets.

• Auction: Token auctions are inherently limited in the sense that participants can only buy tokens, but not sell them, creating an inefficient and illiquid market.

In their view, it should be cheap and easy for project teams to incorporate, keeping market liquidity at a satisfactory level. As for the traders / bidders, they should start on an equal footing with everyone else.

Therefore, the company presented Crowdpooling in DODO, the equal opportunity way to distribute tokens and launch liquidity markets.

Also read: SKALE Network Released Mainnet Update “Denali”

How Crowdpooling works

DODO shared a detailed list of how it works:

• You want to distribute your token asset. You provide a few chips and set a soft limit target. A portion of the tokens you supply will be used for crowdfunding and the remainder will be used for demand-side liquidity in the pool. You set the starting bid price and a start and end time for your Crowdpooling campaign. After that, anyone can participate in the offer by betting their capital.

• Once Crowdpooling ends, participants can claim the tokens based on their bets at the predefined initial bid price. If Crowdpooling’s progress exceeds its soft-cap target (that is, there is more capital in the pool than its ceiling), all participants claim the tokens proportional to their shares in the pool, at the initial offering price. Any difference between the amount wagered by the participants and the actual cost of the tokens (i.e., the initial offer price * the number of tokens received) is refunded to the participants.

• Once the Crowdpooling phase is finished, new public liquidity funds will be automatically established with the capital raised and the reserved tokens for demand-side liquidity from step 1 and the trade will be available. The initial market price is the initial offer price from step 1.

Regarding liquidity protection, the company mentioned that:

• The supply-side liquidity is established by the income of the Crowdpooling participants, and the supply-side liquidity is established by tokens reserved for the Crowdpooling groups.

• This initial liquidity belongs to the creator of this Crowdpooling campaign, but the creator cannot remove this liquidity during the liquidity protection period.

• Anyone can provide liquidity to these groups AMM-style, with the added benefit of increased capital efficiency thanks to PMM.

• This resulting spot market follows the link curve method: when a merchant buys tokens, the price of the token increases; When a merchant sells tokens, the price of the token goes down.