A detailed 2025 review of DODO exchange on Ethereum, covering its PMM tech, fees, token utility, security, and how it stacks up against Uniswap and SushiSwap.
PMM Algorithm: How It Works and Why It Matters
When working with PMM algorithm, a price‑matched market‑making model that aims to keep prices close to external references while reducing slippage. Also known as Proactive Market‑Making, it blends the stability of constant‑product curves with the flexibility of order‑book pricing. The core idea is simple: instead of letting price drift purely based on pool depth, the algorithm ties swaps to a target price, usually an oracle or a moving average, and adjusts liquidity distribution dynamically. This approach helps traders get tighter spreads, especially in volatile markets, and gives liquidity providers a more predictable return.
Another pillar in the ecosystem is the Automated Market Maker (AMM), a smart‑contract system that replaces traditional order books by using mathematical formulas to price trades. AMMs like Uniswap rely on a constant‑product curve (x·y=k), which can cause large price impact for big trades. The PMM algorithm improves on this by incorporating a Protocol Fee, a small charge on each swap that funds the platform and can be redirected to liquidity incentives. By charging a fee proportional to the deviation from the target price, the system discourages price manipulation and rewards honest traders.
Liquidity providers are the lifeblood of any AMM, and the Liquidity Mining, a reward program that distributes native tokens to users who lock assets in a pool plays a crucial role in bootstrapping the PMM model. Because the algorithm keeps prices closer to market rates, providers often see lower impermanent loss compared to traditional AMMs. This makes liquidity mining a more attractive proposition, especially when combined with the protocol fee that can be shared among participants. In practice, projects that adopt the PMM algorithm report higher capital efficiency and smoother price curves, which translates into better user experience for traders and steadier yields for providers. Below you’ll find a curated list of articles that dive deeper into the theory, compare PMM to other models, and showcase real‑world implementations across DeFi platforms.
