Single-Token Pool

Many project owners face the following problems when using AMMs to provide liquidity:
  • You must have project-side tokens to provide liquidity
  • Buying project-side tokens requires good liquidity
To solve these problems, project owners must rely on a complex issuance process. Whether it's an auction, liquidity mining, or providing initial liquidity themselves, it takes up a lot of the project owner's energy and increases the barrier to user participation.
DODO has created a unilateral initial liquidity solution to make the whole process simple, called the Single-Token Pool model. Let's see how it works.

DODO's Single-Token Pool Model

A Single-Token Pool can be compared to a vending machine that allows you to return assets purchased from it. The more units you buy, the more expensive each one becomes. The money you pay for the goods is stored in the pool, and when you don't want the assets you purchased, you can return them at the current price.
The price curve of a Single-Token Pool is defined by the PMM algorithm as a price curve with a minimum price, which is the price of the first item purchased from the pool.
Anyone can set up a Single-Token Pool and set the variety of goods it contains. You can set it up with mainstream assets like BTC and ETH, or with new assets that you issue yourself.
You don't need to provide any denominated assets at first, just fill the vending machine with goods. This design allows you to create ample liquidity for your tokens on DODO, without spending a dime, in just 5 minutes.

Similarity to AMMs

If a Single-Token Pool is created with the slippage factor
and the guide price
is a very small number, then it behaves almost the same as an AMM. You can think of the Single-Token Pool curve as an AMM price curve that truncates the parts that are smaller than
. The smaller
is, the closer it is to a true AMM curve. This can be accomplished by setting
For more information on these calculations, see the PMM Overview section.

Anyone Can Participate

Anyone can supply the Single-Token Pool with both sides' assets to participate in the liquidity supply, just as with an AMM. The difference here is that the value of the two assets need not be 1:1 when resupplying.
Anyone can participate in adding liquidity, which is these pools are sometimes referred to as public pools.

Use Cases

Build Initial Liquidity for High Volume Markets

Suppose you are a blockchain developer and want to build a community-driven project. You can issue 10 million tokens, of which 1%, or 100 thousand, are reserved for the project team. The rest (i.e. 9.9 million tokens) are distributed to the community.
Let’s say you set the token price to $1. If you want to create a liquidity market for all 9.9 million tokens on an AMM, you need another $9.9 million as the bid-side liquidity to do it - a huge amount of money that you probably don’t have, and so this project becomes infeasible.
Your alternative is to create a simple AMM pool with much fewer tokens and less liquidity in it, say $1,000 and 1,000 tokens, but if someone wants to invest $100,000 in your project token, he will have to pay $100,000 and receive only 1,000 tokens in return. This amounts to $100 per token, 100x the market price you set! This is, of course, not desirable, and this market is definitely not an efficient market.
However, you can choose to build a Single-Token Pool with these 9.9 million tokens at an initial price of $1 and with the k value set to 1. If a community member is bullish on your project and buys 100,000 tokens, his average price is only $1.005 per token!

Raising Liquidity Fast

Imagine, for example, an algorithmic stablecoin project whose USD-pegged coin has dipped below $1. The project needs to raise liquidity as soon as possible to prevent a death spiral. If you can reverse the price decline at $0.9, it will greatly strengthen market confidence, but if it reverses only at $0.5, it may have led to a permanent loss of confidence in your token.
This hypothetical project has an easy solution to its woes! Suppose the project token is called X. Create a DAI-X pool, set the guide price to 1, and
. In addition, you incentivize liquidity providers to deposit their LP tokens into this pool with rewards in X. This way, you can ensure ample bid-side liquidity that is allocated near 1 X = 1 DAI, which is a much more capital-efficient funding model than traditional AMMs.
Even if it’s not an algorithmic stablecoin project, you can still raise funds for your token at key support price levels with Single-Token Pools, coupled with a reward incentive program to encourage liquidity provision.