Embracing Liquidity Simplification with DODO Vending Machine (DVM)

In the realm of Automated Market Makers (AMMs), project owners are often confronted with significant liquidity challenges. These include the necessity to hold project-side tokens for liquidity provision and the requirement for substantial liquidity to purchase these tokens. The traditional approach to circumvent these hurdles involves a complex issuance process involving auctions, liquidity mining, or personal initial liquidity provisioning, which can be resource-intensive and raise the barrier to entry for user participation.

To streamline this process, DODO has pioneered the Single-Token Pool model, an innovative liquidity solution likened to a vending machine that simplifies the initial liquidity setup. Here's how the DODO Vending Machine (DVM) model functions:

Pool Model Explained#

The Single-Token Pool can be envisioned as a vending machine where assets purchased can also be returned. This model employs a price curve defined by the PMM algorithm, where the cost of assets progressively increases with each purchase. The funds paid are retained in the pool, allowing users to sell back the assets at prevailing prices. The initial purchase sets the minimum price on this curve.

Customization and Accessibility#

Setting up a Single-Token Pool is permissionless, and the pool can contain a variety of assets, from mainstream ones like BTC and ETH to new, project-specific tokens. Significantly, no initial denominated assets are required; one only needs to stock the vending machine with goods. This design ensures that project owners can create abundant liquidity for their tokens on DODO without financial outlay in a matter of minutes.

Use cases#

Practical Applications#

The DVM is especially beneficial for building initial liquidity for projects. For instance, a blockchain developer aiming to launch a community-driven project can set up a Single-Token Pool for token distribution without the need for equivalent bid-side liquidity. This model supports market efficiency and fair pricing, avoiding the pitfalls of disproportionate pricing seen in traditional AMMs.

Rapid Liquidity Acquisition#

For urgent liquidity needs, such as an algorithmic stablecoin project looking to avert a market confidence crisis, the DVM can be instrumental. By setting strategic guide prices and incentivizing liquidity provision with token rewards, projects can swiftly establish ample liquidity at critical price levels, thereby offering a more capital-efficient model than conventional AMMs.

In summary, DODO's Single-Token Pool, or DODO Vending Machine (DVM), is a transformative tool that simplifies the liquidity provision process, lowers entry barriers for project owners, and fosters an efficient and inclusive market environment.

Another use case: Equal to AMM#

By setting the slippage factor and guide price to sufficiently small values, the DVM behaves akin to a conventional AMM. This functionality resonates with a broad user base familiar with the classic AMM mechanics. To cater to this preference, we have integrated a feature known as the “standard pool” into our product. This mode simplifies the process for users by pre-filling all necessary parameters, enabling the creation of pools on DODO with the same ease as setting up pools on Uniswap V2. This adaptability underscores our commitment to user-centric design, allowing users to navigate the liquidity landscape with both comfort and familiarity. The DVM uses the PMM algorithm, which is different from the normal AMM pool mechanism, the initial price calculation is also different from AMM, please refer to: DVM Initial Price Formula Explanation.