Whether you are a project owner, market maker or individual developer. As long as you are interested in market making and want to make it big, then the private pool, the most flexible and advanced market making tool, is for you.
In this scenario, you own all the funds in the pool and can adjust the parameters or replenish the funds at any time.
In other words, you can set the price curve any way you want and provide any amount of money, just like a grid trading instrument.
You can use private pools like this
You think ETH is going to fluctuate at $3000 and concentrate your liquidity around $3000, making very competitive liquidity with very little capital and earning large fees.
You sense that ETH is about to rise and withdraw your ETH inventory to reduce your one-sided risk. Or go further and withdraw some of your USDT to invest in more ETH.
You want to raise money to buy a CryptoPunk worth 1000 ETH, you can issue 1000 MINIPUNK tokens and sell them at a constant price of 1MINIPUNK = 1ETH. After the sale, the 1000 ETH in the pool can be withdrawn immediately and used to buy punk.
Try it now
DODO - Decentralized Trading Protocol for Web3
How Market Makers Use Private Pools
Wootrade has created a private pool of funds at DODO, using the PMM algorithm to provide liquidity on the chain. It also hedges positions on other exchanges to generate stable returns.
In the eight month period from 2021.3 to 2021.11, Wootrade provided over $10 million in TVL and generated over $10 billion in trading volume and $7 million in fee income!
You can view the pools opened by our market maker partners here：
How is all this done?
While current on-chain liquidity is mainly provided by AMM, this type of market making is very rudimentary. It is essentially a grid trading strategy that ranges from 0 to infinity. Professionals can often provide liquidity more efficiently based on some market information, and in turn get far better capital utilization than AMM, wrestling a large number of deals with a small amount of capital.
The PMM algorithm provided by DODO is more flexible than AMM and can take advantage of professional market makers. You can adjust the parameters to make PMM quotes fit to your own quotation model.
In addition, DODO has been accessed by all major aggregators, including 1inch matcha paraswap, etc. The diverse distribution channels can help you deliver mobility to more users.
What does a market maker need to do?
In simple terms, you just need to create a private pool and inject funds into the pool.
Set your liquidity parameters according to market conditions.
You can provide liquidity in the defi world and earn commissions!
Is there a best practice
Private pools are very flexible and the ways to use them are still being explored. However, many people have adopted a fully or partially hedged approach to using private pools.
When the pool closes with a user, you are exposed to risk exposure. You can hedge off this exposure in real time to make a risk-free profit. Building an automated listening robot requires more code-related experience and can be found in the following documentation
When you feel the market is at risk of falling, you can simply reduce your buy inventory and build a liquidity position where the buy order is thin and the sell order is thick. In the event that someone sells a lot of apples, the offer you give will drop quickly to protect your capital.
Case 2: Active price discovery
You feel that token X has a lot of potential and the price will rise, and don't want to sell token X at a cheap price. In AMM you have two options ：
1.Buy it yourself - need a lot of capital
2.Reduce the size of the pool - liquidity becomes poor
Neither of these options is satisfactory. This is because you don't have the power to actively discover the price within the AMM framework.
But DODO private pools allow you to directly adjust the mid-market price, giving you the expertise you deserve and a more efficient price discovery.
Case 3: Constant Price Market
, i.e. you can exchange at a constant price. For example, if you issue a new stablecoin X, anchored at USDT, you can set up a 1:1 exchange market for the stablecoin with a certain amount of USDT as reserve and a large number of tokens of X. You can also set up a very high price market for the stablecoin. You can also set it to a very small value
,for example, to get an "approximately constant" price curve similar to the curve.
Case 4: Degradation for AMM
, and top up both tokens with a ratio of price
, to get a market that performs the same as AMM.
Case 5: Market capitalization management needs
If you provide the primary liquidity for the market, you can set the price and depth of buy and sell orders as needed. To provide coin price support, or to discourage speculation.