It is no secret that the DEX space is tough. It’s already crowded with some really large players at the lead. However, DODO seems undeterred. With the bold vision of “building the hottest next-generation decentralized exchange” the platform has been quietly shipping new features and is currently ad portas of releasing their latest large upgrade: v2.0. In this piece I’ll explore DODO’s evolution up until now and what we can expect for the upcoming v2.0.

V1.0: The Beginning

DODO launched in August of last year with a novel and creative approach to DEXs. Instead of using Uniswap’s constant product market making algorithm (the famous x*y=k) to determine asset prices, DODO introduced the concept of a proactive market maker (PMM). As its name indicates, the PMM proactively reacts to market conditions by incorporating oracle prices as an input to its formula. Among other benefits (which we’ll get into later on) the PMM allows for greater capital efficiency, as the algorithm adjusts the pricing curve such that a higher share of the liquidity is concentrated around the market price of the asset (see Figure 1).

Figure 1. DODO Curve vs. Uniswap Curve. Source: DODO

The previous approach isn’t perfect, though. Since oracle updates can lag market movements (particularly relevant amids