DODO Integrates Chainlink Live on Mainnet, Kickstarts the On-Chain Liquidity Revolution
Today, the DODO team is pleased to announce that it has chosen Chainlink (https://chain.link/) as its oracle provider of choice and is already consuming its ETH/USD Price and LINK- USD Price Reference Data feed live on mainnet.
DODO is a nascent on-chain liquidity protocol that offers a smoother, more advanced crypto trading experience than other decentralized exchanges (DEXs). It is powered by the ground-breaking Proactive Market Maker (PMM) algorithm, which mimics human market making behaviors and gathers more capital near the market price in order to facilitate more efficient and frequent trading. PMM’s major selling point is its outstanding liquidity, which is on par with centralized exchanges (CEXs), making DODO the ideal DEX of choice for traders and liquidity providers alike.
RadarBear, DODO’s co-founder, looks forward to working with Chainlink and kickstarting the on-chain liquidity revolution.
“At DODO, we believe in leveraging industry expertise and forging strong, meaningful relationships. Chainlink is the undisputed leader in the oracle space — it has a proven track record of solving the oracle problem and providing high quality data to live DeFi applications.” Radar said. “Our backtests confirmed that Chainlink is fully compatible with the DODO platform. Integrating with Chainlink makes perfect sense.”
Chainlink will assume a crucial role in the functioning of DODO — it provides DODO with reliable, accurate price reference data for mainstream crypto assets, which is of utmost importance in a market making scenario. DODO uses this price data to fine-tune market prices on the platform, achieving market-leading liquidity.
In addition to being a proven and easily integratable solution for securing high value contracts, we selected Chainlink because it provides accurate price data sourced from multiple high-quality data aggregators, it deploys decentralization at the node and data source level to ensure no single point of failure, and it offers users on-chain visualizations that allow them to independently monitor and verify the health of their price oracles.
Technical Integration Details
As outlined above, the Chainlink oracle serves as a baseline for asset pricing on the DODO platform. This section will elaborate on the technical details of this integration.
DODO’s PMM uses the following pricing formula:
i is the market price provided by the Chainlink oracle. Depending on the liquidity in the capital pool, PMM changes the parameter R in real-time to fine-tune P, the market price on DODO, in order to maximize fund utilization. Without this price data, PMM cannot adjust the market price accurately, thus incurring losses for traders and liquidity providers. Thanks to Chainlink’s highly reliable, low-latency oracle price feed, PMM can fully realize its potential and offer liquidity comparable to CEXs.
More details on PMM and how DODO leverages oracles can be found at https://dodoex.github.io/docs/docs/.
About Front Running
Front running on DODO could occur in the following scenario.
Arbitrageurs listen for oracle price updates transactions. If they see that the oracle price for an asset will go up in the next block, they will buy the asset on DODO before the price update by paying higher gas prices and sell the asset immediately after the oracle price has been updated. This will result in a loss for liquidity providers, and this loss is referred to as arbitrage loss.
This might seem like a big deal, but the truth is, such opportunities are few and far between, and not necessarily profitable for arbitrageurs.
Front running is only profitable when the price fluctuates significantly. This is because DODO charges a 0.3% transaction fee per trade, thus buying and selling assets once incurs a 0.6% transaction fee overall. Therefore, if the price discrepancy between the oracle updates is less than 0.6%, front running is not profitable at all for arbitrageurs.
More importantly, the Chainlink oracle provides price updates by aggregating responses from 21 independent price feeders (oracles) and updates every 0.5% deviation, making us not susceptible to front running. This effectively mitigates the risk of arbitrageurs extracting value from liquidity providers.
If you’re a developer and want to quickly get your application connected to Chainlink Price Reference Data, visit the developer documentation and join the technical discussion in Discord. If you want to schedule a call to discuss the integration more in-depth, reach out here.
Chainlink is an open-source blockchain abstraction layer for building and running decentralized oracle networks that give your smart contract access to secure and reliable data inputs and outputs. It provides oracles to leading DeFi applications like Synthetix, Aave, and Kyber Network; numerous blockchains such as Ethereum, Polkadot, and Tezos; as well as large enterprises including Google, Oracle, and SWIFT.
Note: chainlinkecosystem.com does not claim any ownership of this content, all credit to DODO, view official announcement.