DODO V2 was deployed to the Ethereum mainnet in February 2021, providing market makers with a customizable and flexible market-making curve, dramatically improving market makers' capital efficiency.

In the development of DEX, a constant theme is the improvement of capital efficiency. Our previous research article compares and analyzes three DEXes that improve capital efficiency by concentrating liquidity. We also present an in-depth analysis of their underlying algorithms, the performance of sampling pools, and the capital efficiency of market making in DODO. Recently, we interviewed Shadow Labs and Kronos Research, the market makers on DODO, to talk about their experience of market making on DODO as professional market makers.

Interviewee: Shadow Labs, Kronos Research

Interviewer: Bruce (Crypto Analyst at DODO Research)

Operating Experience on DODO

<aside> 💡 DODO's PMM algorithm provides market makers with a flexible market-making curve and a high degree of customization. Professional market makers can customize parameters based on market-making strategies and needs for capital efficiency improvement. Because of the high frequency of parameter modification, market makers prefer to make markets on chains with lower gas fees, such as L2.

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Q: DODO's PMM algorithm provides custom parameters for market makers, such as reference prices. Which parameters are commonly used in your market-making process?

Shadow Labs: We update our fee rates and prices more frequently. Since Shadow did not put the inventory adjustment on DODO, The k value ( k value is a parameter affecting the liquidity distribution, the smaller the k value, the more concentrated the liquidity distribution) has not been adjusted. We set k at a very small value. The price will be updated in about 30 seconds, and once reaching a certain threshold, we will get the price revised.

Kronos Research: Kronos will adjust the k value to hedge the flow. The fixed k value is used and changed regularly in the early stage. Later, we will update the k value in real-time according to the order book depth of the centralized exchange. But in general, the k value has the smallest he update requirement compared with the other two. The first is the price, followed by the fee rate.

Q: What is the gas-fee-related experience as a market maker on DODO?