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Proactive Market Maker DeX DODO Bucks The Trend of Declining Trade Volumes

Last Updated April 11, 2024 5:55 PM
James Morales
Last Updated April 11, 2024 5:55 PM

Key Takeaways

  • In the past week, the DODO decentralized exchange has witnessed trading volumes increase by around 8%.
  • Meanwhile, most DeXs have moved in the opposite direction.
  • After a strong March, Uniswap, Pancakeswap, and Curve all saw a decline in trading activity in April.

In recent weeks, DODO has witnessed surging trading volumes, even bucking the broad slowdown in DeFi activity that has affected most of its peers in April

Launched in 2020, the decentralized exchange (DeX) offers an alternative take on the traditional Automated Market Maker (AMM) paradigm. Does its recent success mean the Proactive Market Maker (PMM) concept has finally caught on?

AMM vs. PMM: Understanding the Difference

Following the model established by Uniswap, classic DeXs rely on AMMs to facilitate trades, automatically setting prices based on the ratio of assets within liquidity pools.

While this approach has fueled the growth of modern DeFi, the Uniswap take on AMMs has some disadvantages. 

For starters, liquidity providers put themselves at risk of impermanent loss, which occurs when the relative value of assets in a liquidity pool changes over time.

Due to the risk of impermanent loss, liquidity providers are typically less inclined to deposit volatile tokens into pools. This is why the largest pools on Uniswap consist of pairs of relatively stable assets.

To solve this problem, DODO developed a more strategic form of AMM that proactively adjusts prices to maintain a more balanced ratio of assets in a given liquidity pool. 

DODO Trading Volume Surges as Other DeXs Stagnate

Since February, DODO’s trading volume has been steadily climbing across the different blockchains it is deployed on.

After a strong March, in the past week, it has witnessed an 8.2% increase in trading volume when almost every major DeX has seen activity decline.

DeX trading volumes
DeX trading volumes have declined in April. Source: DeFiLlama.

After a strong March,  Uniswap volumes have dropped in April. Meanwhile, the second and third most popular platforms – PancakeSwap and Curve – have seen volumes decline by more than 16%, falling to some of the lowest levels seen since February. 

However, the DODO exchange’s performance is not reflected in the price of its eponymous native token. In the last month, DODO has lost roughly a quarter of its value during a period in which Bitcoin has fallen by less than 4%.

 

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