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d17fb892.bd30f2d2.js
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In this state, PMM will try to sell the excess base tokens, lowering the base token balance and increasing the quote token balance, in order to move this state back to the state of equilibrium."),Object(m.b)("p",null,"When a trader buys base tokens, the quote token balance of the capital pool is higher than the quote token regression target; conversely, the base token balance is now lower than the base token regression target. In this state, PMM will try to sell the excess quote tokens, lowering the quote token balance and increasing the base token balance, in order to move this state back to the state of equilibrium."),Object(m.b)("p",null,"The parameter ",Object(m.b)("span",Object(s.a)({parentName:"p"},{className:"math math-inline"}),Object(m.b)("span",Object(s.a)({parentName:"span"},{className:"katex"}),Object(m.b)("span",Object(s.a)({parentName:"span"},{className:"katex-mathml"}),Object(m.b)("math",Object(s.a)({parentName:"span"},{xmlns:"http://www.w3.org/1998/Math/MathML"}),Object(m.b)("semantics",{parentName:"math"},Object(m.b)("mrow",{parentName:"semantics"},Object(m.b)("mi",{parentName:"mrow"},"R")),Object(m.b)("annotation",Object(s.a)({parentName:"semantics"},{encoding:"application/x-tex"}),"R")))),Object(m.b)("span",Object(s.a)({parentName:"span"},{className:"katex-html","aria-hidden":"true"}),Object(m.b)("span",Object(s.a)({parentName:"span"},{className:"base"}),Object(m.b)("span",Object(s.a)({parentName:"span"},{className:"strut",style:{height:"0.68333em",verticalAlign:"0em"}})),Object(m.b)("span",Object(s.a)({parentName:"span"},{className:"mord mathdefault",style:{marginRight:"0.00773em"}}),"R")))))," in the pricing formula above assumes a critical role in facilitating this regression process. The more the capital pool deviates from the equilibrium state, the more ",Object(m.b)("span",Object(s.a)({parentName:"p"},{className:"math math-inline"}),Object(m.b)("span",Object(s.a)({parentName:"span"},{className:"katex"}),Object(m.b)("span",Object(s.a)({parentName:"span"},{className:"katex-mathml"}),Object(m.b)("math",Object(s.a)({parentName:"span"},{xmlns:"http://www.w3.org/1998/Math/MathML"}),Object(m.b)("semantics",{parentName:"math"},Object(m.b)("mrow",{parentName:"semantics"},Object(m.b)("mi",{parentName:"mrow"},"R")),Object(m.b)("annotation",Object(s.a)({parentName:"semantics"},{encoding:"application/x-tex"}),"R")))),Object(m.b)("span",Object(s.a)({parentName:"span"},{className:"katex-html","aria-hidden":"true"}),Object(m.b)("span",Object(s.a)({parentName:"span"},{className:"base"}),Object(m.b)("span",Object(s.a)({parentName:"span"},{className:"strut",style:{height:"0.68333em",verticalAlign:"0em"}})),Object(m.b)("span",Object(s.a)({parentName:"span"},{className:"mord mathdefault",style:{marginRight:"0.00773em"}}),"R")))))," deviates from ",Object(m.b)("inlineCode",{parentName:"p"},"1"),". When the price given by the PMM algorithm deviates from the market price, arbitrageurs step in to help bring the capital pool back to the equilibrium state."),Object(m.b)("h2",{id:"liquidity-provider-fee"},"Liquidity Provider Fee"),Object(m.b)("p",null,"A small amount of transaction fee will be charged on every trade. This fee is called the liquidity provider fee and will be distributed to every liquidity provider based on their proportional stake in the capital pool."),Object(m.b)("p",null,"More specifically, liquidity provider fees are collected from what buyers received and distributed to liquidity providers who supplied this kind of asset to the capital pool. In other words, liquidity providers are rewarded in the same asset denomination. "),Object(m.b)("p",null,"For example, when traders buy ETH tokens with USDC tokens, liquidity provider fees will be charged in the form of ETH tokens, and distributed to liquidity providers who deposited ETH tokens into the capital pool."),Object(m.b)("p",null,"When traders sell ETH tokens for USDC tokens, liquidity provider fees will be charged in the form of USDC tokens, and distributed to liquidity providers who deposited USDC tokens into the capital pool."),Object(m.b)("div",{className:"admonition admonition-note alert alert--secondary"},Object(m.b)("div",Object(s.a)({parentName:"div"},{className:"admonition-heading"}),Object(m.b)("h5",{parentName:"div"},Object(m.b)("span",Object(s.a)({parentName:"h5"},{className:"admonition-icon"}),Object(m.b)("svg",Object(s.a)({parentName:"span"},{xmlns:"http://www.w3.org/2000/svg",width:"14",height:"16",viewBox:"0 0 14 16"}),Object(m.b)("path",Object(s.a)({parentName:"svg"},{fillRule:"evenodd",d:"M6.3 5.69a.942.942 0 0 1-.28-.7c0-.28.09-.52.28-.7.19-.18.42-.28.7-.28.28 0 .52.09.7.28.18.19.28.42.28.7 0 .28-.09.52-.28.7a1 1 0 0 1-.7.3c-.28 0-.52-.11-.7-.3zM8 7.99c-.02-.25-.11-.48-.31-.69-.2-.19-.42-.3-.69-.31H6c-.27.02-.48.13-.69.31-.2.2-.3.44-.31.69h1v3c.02.27.11.5.31.69.2.2.42.31.69.31h1c.27 0 .48-.11.69-.31.2-.19.3-.42.31-.69H8V7.98v.01zM7 2.3c-3.14 0-5.7 2.54-5.7 5.68 0 3.14 2.56 5.7 5.7 5.7s5.7-2.55 5.7-5.7c0-3.15-2.56-5.69-5.7-5.69v.01zM7 .98c3.86 0 7 3.14 7 7s-3.14 7-7 7-7-3.12-7-7 3.14-7 7-7z"})))),"note")),Object(m.b)("div",Object(s.a)({parentName:"div"},{className:"admonition-content"}),Object(m.b)("p",{parentName:"div"},"Base and quote tokens have different returns on investments (ROI) in PMM's funding pool."))),Object(m.b)("h2",{id:"maintainer-fee"},"Maintainer fee"),Object(m.b)("p",null,"A maintainer fee is also collected from what buyers received, and will be directly transferred to the maintainer. The maintainer may be a development team, a foundation, or a staking decentralized autonomous organization (DAO)."),Object(m.b)("p",null,"Currently, the maintenance fee on DODO is 0."),Object(m.b)("h2",{id:"withdrawal-fee"},"Withdrawal Fee"),Object(m.b)("p",null,"A withdrawal will change the PMM price curve and may harm the interests of other liquidity providers. DODO charges a withdrawal fee from liquidity providers who withdraw their assets and distribute it to all remaining liquidity providers."),Object(m.b)("div",{className:"admonition admonition-important alert alert--info"},Object(m.b)("div",Object(s.a)({parentName:"div"},{className:"admonition-heading"}),Object(m.b)("h5",{parentName:"div"},Object(m.b)("span",Object(s.a)({parentName:"h5"},{className:"admonition-icon"}),Object(m.b)("svg",Object(s.a)({parentName:"span"},{xmlns:"http://www.w3.org/2000/svg",width:"14",height:"16",viewBox:"0 0 14 16"}),Object(m.b)("path",Object(s.a)({parentName:"svg"},{fillRule:"evenodd",d:"M7 2.3c3.14 0 5.7 2.56 5.7 5.7s-2.56 5.7-5.7 5.7A5.71 5.71 0 0 1 1.3 8c0-3.14 2.56-5.7 5.7-5.7zM7 1C3.14 1 0 4.14 0 8s3.14 7 7 7 7-3.14 7-7-3.14-7-7-7zm1 3H6v5h2V4zm0 6H6v2h2v-2z"})))),"important")),Object(m.b)("div",Object(s.a)({parentName:"div"},{className:"admonition-content"}),Object(m.b)("p",{parentName:"div"},"Normally, the withdrawal fee is 0 or an extremely small percentage (<0.01%) of what you withdraw. The withdrawal fee will increase significantly only if the funding pool suffers from a serious shortage of either base or quote tokens and liquidity providers intend to withdraw the type of token in shortage."),Object(m.b)("p",{parentName:"div"},"The withdrawal fee serves as a protection mechanism for liquidity providers who maintain their supplies of liquidity and contribute to the sustainability and overall health of the DODO platform."))),Object(m.b)("h2",{id:"deposit-rewards"},"Deposit Rewards"),Object(m.b)("p",null,"Rewards will be distributed to those who make a deposit of base(quote) tokens when the capital pool faces a shortage of base(quote) tokens."),Object(m.b)("p",null,"In the ",Object(m.b)("a",Object(s.a)({parentName:"p"},{href:"./math"}),"next section"),", we will explain the math behind these core concepts. 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