How PMM Algorithm Works?

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What is PMM Algorithm?

PMM stands for Proactive Market Making. It is an algorithm developed by the DODO Defi protocol that gives you a one-sided liquidity token. The PMM algorithm aims to redesign the way the AMM works, to improve capital efficiency, reduce the risk of impermanent loss, and minimize slippage for traders.

How Does the PMM Algorithm Work?

The PMM liquidity algorithm utilizes oracles to minimize impermanent loss and achieve higher capital efficiency. This makes it suitable for use cases such as single-sided liquidity for bootstrapping pools and fully customizable market-making strategies that adapt to market conditions in real-time.

How is PMM Different from AMM?

Impermanent loss is one thing that differentiates the PMM algorithm from the AMM algorithm. While impermanent loss remains a big issue facing AMM, the PMM algorithm offers a solution to it, thereby giving traders the best trading experience.

Conclusion

DODO’s PMM algorithm brings you efficient liquidity, reduced erratic losses, and minimized trading slippage. The algorithm works using oracles to offer contract-fillable liquidity. It also uses oracles to minimize impermanent loss for traders. The PMM algorithm mimics human market trading to aggregate liquidity near the market price. The absence of impermanent loss and lower slippage sets the PMM algorithm apart from the AMM algorithm. It is this algorithm Zeroloss uses to give its users the best DeFi experience.

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