Breaking the Social Contract of the DXdao in Pursuit of Decentralized Exchange Market Share


As a part of the DXswap launch strategy, a fork of Uniswap, the DXdao decided to sponsor a $300,000 USD 50/50 liquidity pool for the DXD/ETH pair with the goal of capturing market share.

To determine the pair ratio, the DXdao passed a proposal to rely on an oracle that pulls the DXD/ETH secondary market rate at the time of liquidity pool deployment. Note that I cannot find a link to a passed proposal for this decision. This is concerning because it raises transparency and good governance issues. Both are core values of the DXdao and any decentralized organization.[1]


There are many issues with this DXswap incentive: (1) a new competing bonding curve will be effectively created; (2) this new bonding curve will start trading at a substantial discount; (3) the new bonding curve’s design is in stark contrast to the original bonding curve’s “linear positive” design; and (4) it breaks an important social contract between the DXdao and contributors by not running the positive linear bonding curve to its completion, which undermines the legitimacy of the DXdao. This is bad for all stake holders.

(1) The New Bonding Curve

The DXdao has been collecting ETH from contributors through a positive linear bonding curve in exchange for DXD tokens, with the express promise of allocating this capital in ways that add value to DXD. The DXdao Frequently Asked Questions section details this relationship: “Purchasers of DXD are funding the efforts of the DXdao in exchange for a right to future cash flows. DXD tokens will be sold to the public in exchange for ETH according to a bonding curve. The curve slope is linear and positive, so each successive DXD is sold for more than the previous. DXD can also be sold back into the curve, although at a lower rate than purchased.” (Frequently Asked Questions,

However, employing this 50/50 liquidity pool incentive for DXswap creates a new bonding curve. A liquidity pool works similar to how a bonding curve works. “Uniswap uses a unique method to settle cryptocurrency trades . . . . [T]okens are bought and sold at a rate determined by a bonding curve . . . . In both cases, the exchange rate is determined by a supply curve instead of a market of orders placed by buyers and sellers.” (Sheridan, Caleb, “Uniswap Report, Case Study” (Jan. 23, 2019), blog/uniswap-report/). “An analysis of Uniswap markets” research paper defines this method as a “constant product bonding curve first introduced by Uniswap.” (Angeris, Guillermo, et. Al “An analysis of Uniswap markets,”[] (Nov. 2019).)

(2) The New Bonding Curve Will Trade at a Substantial Discount

We are in practice launching a second bonding curve at a vast discount to the original bonding curve because the DXdao intends to rely on an oracle that pulls the current DXD/ETH secondary market rate at the time of deployment. If secondary market rates remain where they are now (≈0.35), this will represent an approximate 65% (≈65%) discount to the DXdao’s current bonding curve rate. Thus, under current conditions, the DXdao will deploy raised capital in a 50/50 liquidity pool at ≈65% discount to the rate the DXdao last raised ETH from contributors.

During an October 22, 2020 call with DXswap developers, a member raised the point that the DXswap incentive strategy’s $300,000 USD 50/50 liquidity pool will not dilute the value of DXD because it is a small amount compared to circulating supply and third parties currently provide ≈$600,000 USD in DXD/ETH liquidity on Uniswap and Balancer.

This logic is does not work for several reasons. First, adding $300,000 USD in liquidity will represent ≈33% of the new total decentralized DXD exchange liquidity. That is not an insignificant amount. Second, and more importantly, that third parties that provide liquidity on Uniswap and Balancer have no apparent link to the DXdao. It’s basic knowledge that DXD, like any other tradable token, can be bought and sold on secondary exchanges, and anyone can deploy DXD into permissionless liquidity pools. The actions of individuals are outside of the control of the DXdao. Third parties providing liquidity is wholly different from the DXdao providing $300,000 USD in liquidity, effectively launching a new bonding curve, while the original bonding curve still runs.

(3) The New Bonding Curve’s Design is in Stark Contrast to the Original Bonding Curve

To add insult to injury, this is not a “positive linear” bonding curve. Instead, the 50/50 design of this new bonding curve provides substantial exit liquidity for short-term oriented DXD sellers and speculators, while acting as a heavy anchor on the way back for secondary market prices to reach parity with the original bonding curve. With this DXswap incentive strategy, the original bonding curve is rendered obsolete for the time being. We might as well shut the original bonding curve down all together. However, shutting down the original bonding curve is extremely problematic because the DXdao is still fundraising through it, as voted on by the REP holders.

(4) Broken Social Contract

This DXswap launch incentive breaks an essential element of the DXdao’s social contract with its contributors – that DXD tokens will be sold for ETH according to a linear positive bonding curve. If the DXdao breaks this social contract, it loses institutional credibility by changing its own rules. DXD contributors, until the launch of this DXswap incentive, have partly been incentivized to purchase DXD because of the positive linear bonding curve. The DXdao’s loss of credibility with purchasers is a serious blow to the DeFi space. It is extremely important that decentralized autonomous organizations do not appear to be using the perverse methods that ICOs used during the 2017 boom to entice purchasers and squander funds.

And all of this for slightly cheaper fees on a pair that has a decentralized exchange trading volume of ≈$30-150,000 USD a day. Not an optimal tactic to capture market share.


If the DXdao maintains that a $300,000 USD DXD/ETH pool that undercuts the trading fee by charging 0.1%, lower than competitor rates (Uniswap at 0.3% and Balancer at 0.6%), is an attractive enough incentive to capture market share, some parameters will need to change.

One option could be to deploy the pool at the current bonding curve rate instead of relying on a secondary market oracle. The remaining problem is that the nature of a 50/50 liquidity pool stands in stark contrast to the linear positive design of the original bonding curve. In other words, even when deploying this new bonding curve at the original bonding curve’s most recent rate, the 50/50 design would still make it so that short-term speculators have a convenient way of dumping their DXD tokens. This is a circumstance that we were specifically trying to circumvent by making the original bonding curve “positive linear.”

If we want to stay true to the original bonding curve contract, this liquidity pool should also be designed in a “positive linear” direction. At the very least, we would have to deploy a X/Y Pool instead of a 50/50 pool in which X > Y. Of course, this bonding curve’s rate at deployment would have to be anchored at the original bonding curve’s latest rate, as opposed to relying on an oracle that pulls from secondary markets. However, even then it’s not entirely clear whether this new bonding curve can or should coexist alongside the original bonding curve.


Who exactly does this DXswap incentive benefit? Certainly not stakeholders with a long-term horizon, the DXdao’s fundraising efforts, or the legitimacy of the DXdao.

The only benefactors of this incentive are some short-term speculators and workers. At times, workers may be motivated to push through proposals at any cost in exchange for wages that the DXdao treasury pays out. While these proposals in theory can be voted on by all REP holders, it appears that major decisions are being made without consideration of proper economic theory and against of the collective. Some of these decisions are also being passed through informal communication channels not followed by all relevant stakeholders. This goes against the DXdao’s pride in its unique governance tools.

Perhaps providing liquidity with DXD treasury is not a good option all together, and a different strategy should be considered.

For Governance 2.0 discussions and other pressing questions on the future of the DXdao two possibilities need to be considered. First, whether an individual (or individuals) with a grasp on economic theory should assess the economic impact of proposals for the DXdao before they are voted on. Second, whether it may be time to give DXD holders some form of power in the decision-making process when their interests are at stake, as proposed by Delphi Digital.

[1] If I was not able to locate the proposal and related voting ledger entry through my own error, please provide the link. Otherwise, the validity of this decision violates the DXdao governance contract.


@pulpmachina Great post with lots of good points to address. In reading it I had a few thoughts to add.

First, on this note

I agree that transparency and good governance are paramount for DXdao (and the greater goals of decentralization). Here is the link to the Governance Proposal which you accurately reference. DXdao uses the DAOstack platform and its Alchemy interface for voting and tracking these proposals. Something several people have pushed for was a search bar for proposal history which DAOstack recently added. However, this is one small feature and I think a lot more can be done to improve the user experience of the Alchemy platform. Several members of DXdao have recently increased coordination with DAOstack and I am hopeful we will see some improvements to the platform soon. If for some reason the platform does not evolve with DXdao’s needs, of course the community is not helpless and will be able to address the problems.

Second, I see the key point of this post as addressing the social contract of the bonding curve in relation to the plan of providing liquidity to DXswap from the treasury. I completely agree with you that any DXdao strategy or tactic should be cognizant and respectful of the pricing of the bonding curve, which mints new DXD at increasing prices. A good example of this is that the worker compensation guidelines stipulate that DXD paid to workers should be vesting over 2 years and should be issued at the buy price of the bonding curve. I would like to add the nuance that I don’t think that using the DXD from the premint, which is also mentioned in the faq and readily visible onchain is a breach of the social contract. How the DXdao uses the premint though is critical and I agree with your assessment that providing liquidity to DXswap at current market prices undercuts the bonding curve and therefor is problematic. I would also add the nuance that I don’t think it would be a “new bonding curve” as it would not involve minting new supply, but that I agree it is a problem due to the impact on circulating supply. In other words, the DXdao should not use the premint in a way that disrespects those who bought from the bonding curve.

Third, on the topic of solutions, as you allude to, existing liquidity providers are DXD holders, and so maybe the best strategy will be to focus on encouraging these liquidity providers to migrate before relying on the deployment of DXD from the treasury.

Fourth, in regards to Governance 2.0 and economic theory, I believe DXdao needs the best minds and best expertise it can find to address Governance 2.0. If you have thoughts on how to help I would encourage you to participate in the governance discussions on Keybase, DAOtalk, and the weekly governance call. For reference here is the active proposal for the Governance 2.0 Working Group.

Fifth, in regards to this point:

Something that is actively being worked on is to deploy a “DXD Guild” which could be assigned Reputation. This effort is being led by @AugustoL with support from Block Rocket. Augusto is currently busy with getting the core DXswap contracts and dapp released, but when that is finished I believe he will be focused on getting the DXD Guild live! Personally I am really looking forward to have DXD votes on financial issues like the one being discussed in this post.

Lastly, I wanted to highlight this point:

I am curious what can be done to make improvements here and where you see the current lapses happening.

Cheers, and looking forward to further discussions.


This is a very interesting set of topics - lots of great points and questions by @pulpmachina and informative responses by @JohnKelleher

Big picture, I think the key question is can DXswap become an important revenue generating machine for DXdao and DXD holders?
And, if so, what are some steps that need to happen to get that machine going?
Are there certain near term tactics DXdao can take to start building usage of this machine?
And will this, combined with everything else DXdao is building and strategizing for, benefit DXdao and DXD holders in the long term?

@pulpmachina proposes one “solution” of:

The key problem with this “solution” is that if you provide liquidity to the DXswap pool at the bonding curve price, the pool will immediately be sold into by the market (selling DXD) and pushing the price down to the price of the current market price, as shown on Uniswap. DXdao would immediately be buying tons of DXD at currently above-market prices. This would not be a smart move.

There are numerous ways that DXswap can attract liquidity into DXswap instead of leveraging its own capital for liquidity providing. Finding the right balance is key.

At the end of the day, I believe that DXdao and DXD holders will want to “invest” in the future success of DXswap today. If we take a longer-term multi-year view on the system that is DXdao/DXD/DXswap and DXdao’s other products, I believe that DXdao’s immediate goals are focused on growing usage of its products, attracting liquidity, refining the user experience, and positioning itself to succeed moving forward.

Looking forward to more discussions about how to plan this strategy.


Just a thought: wouldn’t ratifying a proposal that you are going to action the DXD liquidity at ‘x’ price signal to the secondary market to raise before this was enacted? I’d doubt the price on Uniswap would remain where it is then all of a sudden trigger a dump on DXswap when it is launched. I’m not saying the price will remain at whatever is set by DXdao, but I’m confident it would be higher than just setting it at the secondary market.

Has there been any IL calculations on the DXD liquidity added to these pools should the price return to the bonding curve? I assume the anticipated fees received is expected to offset any IL?

Providing liquidity at the current secondary market price is really concerning for me as a DXD holder. It assumes that the current secondary market (with very low volume) has efficiently priced DXD and we are confirming this by essentially setting more resistance to get back to the bonding curve. There is more support being added, however this could be achieved by sending ETH to the bonding curve from the treasury.

I’m happy that this has been brought to light now as I was wondering how the price was going to be set.

Looking forward to the continued discussion!


I was aware of this proposal at the time of writing. Unfortunately, this proposal only voted on the specific amount of liquidity provided ($300k) as well as the trading fees charged (0.1%). However, this proposal did not detail a 50/50 liquidity pool. As discussed in my initial post, the 50/50 liquidity pool provides substantial exit liquidity with minimal downward slippage, as opposed to the positive linear bonding curve that is currently running. The proposal also did not state that the pools would rely on an oracle that pulls from secondary market rates or detail the design of this new DXD/ETH bonding curve. These are all significant strategy choices that should have been at least voted on by REP holders that will have significant effects on the original bonding curve.

I want to discuss your other points, but I felt it was worthwhile to state this first as it raises a separate problem regarding transparency and good governance issues. This decision is exactly what I would consider as needing a proposal and REP vote.

Of course, all decisions cannot be made through rigid governance proposals because it’s inefficient. It may, however, be useful for Governance 2.0 discussions to outline what types of decisions must be brought forward through a proposal, e.g., where a decision has a significant economic effect on a previously running strategy with consequences for DXD holders. I think this is just one example, and a basic working framework could be created that triggers an automatic need for a formal proposal.

Looking forward to others’ thoughts on this.

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Why doesn’t the DAO just buy $150,000 worth of DXD off the open market and use that? DXdao has the money. Issue here seems to be additional issuance of DXD at sub-current-curve prices more than anything else.

Let’s not over-engineer simple token designs.


A potential DXD buy-back was discussed in the last Friday call and several other actions the DXdao could do to align all interest groups to make the launch and especially the liquidity program of DXswap a success!

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During an October 22, 2020 chat regarding the DXswap 50/50 liquidity pool issue, keybase member @jpkcambridge (@JohnKelleher on DAOtalk) made several interesting points and proposed solutions. These points are also listed in the DXswap Strategy Chat Oct 23 notes (see

My responses are below:

Point 1: “The goal of providing liquidity to DXswap is to make DXswap competitive on DXD liquidity. How can we achieve this goal while being respectful of the DXD holders who bought from the curve at prices higher than the current market price?”

Response 1: It’s not clear that it’s possible. It’s a good starting point to raise the question of how to be respectful of DXD holders who bought from the curve at prices higher than the current market price by providing liquidity. However, the inquiry doesn’t stop there. A 50/50 liquidity pool also implicates issues on how to respect the original contract between all previous and current DXD holders and the DXdao. Further, this incentive also undermines the REP holders that voted against halting the original bonding curve, since this DXswap incentive renders the original curve obsolete for the time being.

Point 2: “The Uniswap pool has 608 DXD currently, so one thought is to target a depth that beats the Uniswap price and only provide enough liquidity from the treasury to achieve the targeted depth, and no more, keeping the amount of released DXD to a minimum.”

Response 2: The design of a 50/50 liquidity pool bonding curve undermines the original bonding curve. It doesn’t matter at which rate this liquidity pool bonding curve starts trading.

Point 3: “Another angle of attack could be to do a DXD buyback using ETH from the DXdao treasury. Right now the circulating market cap of DXD is under $7M while the non-DXD holdings of the treasury are near $10M. The DXD necessary to beat Uniswap market depth could be bought up from the open market. To throw out some rough numbers, maybe that would mean something like using 500 ETH to buy 1000 DXD.”

Response 3: It may be possible to buy our way back on Uniswap, but the amount needed is much more than currently suggested. Further, why focus so heavily on Uniswap when the majority of secondary market liquidity resides on Balancer. Uniswap holds ≈$160,000 USD of DXD liquidity whereas Balancer holds ≈$500,000 USD of DXD liquidity. If we do a DXD buyback on Uniswap, arbitrageurs will find a healthy opportunity to immediately sell at the higher Uniswap price into the lower Balancer price until both ratios meet. Since Balancer is home to ≈3x the DXD liquidity of Uniswap, moving the secondary DXD market price back to the latest original bonding curve rate will be much more expensive than 500 ETH. Even if we bought our way back to the original bonding curve rate, the original bonding curve will be undermined, as it will have to compete with a new bonding curve that is not linear positive.

Point 4: “Yet another approach to beating Uniswap depth could be to not use treasury DXD at all, but rather to incentivize liquidity through rewards (aka “yield farming”). DXD could be used but that would also result in releasing more DXD, so perhaps ETH could be used instead.”

Response 4: Yield farming is an interesting solution. Of course, it comes with its own problems. In particular, there are potential plutocracy issues, if DXD holders have voting power in the future. Regardless, yield farming may attract sufficient liquidity and, thus, trading volume.

There’s also precedent for yield farming within the DXdao. The DXdao was very much a pioneer of yield farming more than a year ago, long before the 2020 explosion. In fact, that’s how I, and other REP holders, obtained REP. It seems that many people are not aware of this initial yield farming scheme. Perhaps it’s because 2019 yield farming produced REP that has no direct economic value because it’s non-transferable. It’s interesting to now see members be strongly opposed to yield farming after some of us obtained DXdao REP through the very same mechanism at the inception of DXdao in 2019.

The difficult question that must be considered is whether any incentive will pull in enough liquidity and trading volume because the innovation with DXswap has been frontrun by others and therefore may be lacking at this point. (See @clesaege, Ask devs, is a layer 2 Uniswap possible? .)

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Well I think the dxDAO shouldn’t even release DXswap:

  • The promised of DXswap (decentralized governance and fees for platform development) has already been done by SushiSwap and Uniswap.
  • Forking other people with little innovation is not “nice” and will decrease dxDAO relationships with other projects and individuals. It would be seen as a “greedy fork”. We’ve also seen initial dxDAO people (Martin koppelman) distanciating themselves from the project.

It doesn’t mean there can’t be an AMM made by the dxDAO, but it would have to provide real innovation to be worth it.

  • The promised of DXswap (decentralized governance and fees for platform development) has already been done by SushiSwap and Uniswap.

Comparing DXswap governance system with SushiSwap and Uniswap is a clear indicator for me that you don`t have a clue about the DXswap governance system.

Forking other people with little innovation is not “nice” and will decrease dxDAO relationships with other projects and individuals. It would be seen as a “greedy fork”. We’ve also seen initial dxDAO people (Martin koppelman) distanciating themselves from the project.

We are seeing with that you can provide an utility for people by just changing a few parameters of the protocol. My point is, DXswap will focus on providing utility to the ethereum ecosystem others don`t want to/do not care or even more important just cannot especially because they want to play nice with crypto twitter/buddies. The true innovation is connecting the DXdao to DXswap.

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It’s not even going to be a “greedy fork” as I imagine, with the tepid liquidity it is going to be a monumental flop. There is nothing interesting about dxswap, there is no real liquidity being provided so price is also going to be terrible.

It’s a bad idea, you guys had a shot in May but everyone was able to execute much quicker and at this point it just seems like people working for the DAO with their hands out trying to get paid to “build a road to nowhere” rather than developing a product the market actually desires.

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It’s not even going to be a “greedy fork” as I imagine, with the tepid liquidity it is going to be a monumental flop.

I would consider a monumental flop was the introduction of the the amazing list feature on Uniswap where now the heavy work is done by the user and not by the product itself.

There is nothing interesting about dxswap, there is no real liquidity being provided so price is also going to be terrible.

Just the fact that the DXdao itself will provide liquidity on DXswap is a novelty which was never done before. Sure, there is no real liquidity because DXswap is not launched yet.

It’s a bad idea, you guys had a shot in May but everyone was able to execute much quicker and at this point it just seems like people working for the DAO with their hands out trying to get paid to “build a road to nowhere” rather than developing a product the market actually desires.

Everyone executed much quicker because they just redeployed everything. The DXswap codebase has been changed to add the DXdao connections to it. DXswap is not a normal fork. None of those forks can change the protocol fee, the individual pool fee and delegate ownership of those pools.

DXswap is a long term project and will see substantial change not only on the frontend but also on the protocol level. The real work is just beginning!


Could you please elaborate what is so innovative about the DXswap governance system? As it is now, DXswap is governed by the few who yield farmed REP in May 2019 and some workers who have asked for REP in return for their labor. Meanwhile, all other stakeholders do not have governance voting rights.

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I understand it’s not always easy to follow along with developments, but I’m a little disappointed that community members are making negative statements about DXswap without first asking what DXswap offers. @clesaege Particularly disappointed here considering your role with Kleros which is an important partner for DXdao. Kudos to @pulpmachina for being reasonable and inquisitive.

Trust me, as the author of the post made in May about forking Uniswap, I understand the feeling that DXdao got beaten to the punch by Sushiswap. But look, Sushiswap and DXswap were always fundamentally different in their approach. The innovation of Sushiswap was applying liquidity mining for ownership and token distribution. This was so successful that Uniswap quickly followed with their own token distribution. Since Uniswap’s move though, Sushiswap has consistently been losing marketshare and as of this writing 24 hour volume on Sushiswap is 1/15th of Uniswap. The idea from the beginning with DXswap was never focused on yield farming or distributing a new token. DXdao already has a token. While it would have been great in the short term for DXD price, in my opinion, it would not have been a prudent move for DXdao to do a sushiswap style fork and flood the market with DXD. In fact, DXdao would not have been able to do this, as the majority of the DXD premint is still locked up!

So let me try to address a couple questions. What does DXswap offer? And why has it taken so long!?

From the original post to today, the efforts around DXswap have been focused on governance. DXdao has taken Uniswap and changed the core contracts (where the liquidity resides) to allow individual pair fees to be changed as well as the protocol fee to be changed. The ability to change these fees is controlled by DXdao (if you are discontent with current governance structure, you can direct your energies here) but can be assigned on a pair by pair basis to other parties. The idea now is to hand over control of the pair fee setting to the LP holders. As part of these governance efforts, DXdao is in the process of building integrations between DXdao and DXswap to allow it to set the fees, add and remove liquidity, and direct profits to DXtrust (aka the bonding curve). As @corkus points out, I believe a DAO adding liquidity to a protocol is a big step forward and what we are building for DXswap can be leveraged in the future. Besides the governance aspect of DXswap, take a step back. DXdao is building a product suite and having an AMM protocol in the arsenal will be very handy. Capturing post Mesa IDO liquidity and trading volume and integrating with Omen to allow seemless exchange between collateral tokens are ideas that could be applied today for the DXdao product suite. But I can imagine many more use cases for integrations and partnerships as I am sure you could too if you take a walk and contemplate it. Besides all of this, DXswap also represents the first time DXdao is owning a smart contract protocol, an important step.

So whether or not you find that compelling you still might be thinking, why is it taking so long?? The idea to fork Uniswap was there in May, 3-4 months before Sushiswap! The most significant factor here is that in May it was just that, an idea. And at that time the product group of DXdao consisted of @corkus, myself and @AugustoL, and boy we had our hands full and still do. Now the product group is 11 people and growing, but it takes time and care to grow a great community. I couldn’t be more excited about the dedication and ingenuity of those involved. Another major factor is that DXdao has been busy with a lot of other things as well . . . Omen, Mesa, Rails, adding governance features and integrations, establishing procedure and structure. In addition to that, it’s a DAO and decision making requires consensus. Finally, DXswap involves a decent amount of work. Besides the changes required to the 4 repositories involved with Uniswap, there are governance integrations and audits being worked on.

In summary, I am super excited about DXswap and the future of DXdao and as I see it, DXdao is not trying to beat Uniswap or Sushiswap at their game, but trying to change the game for DeFi. DeFi protocols exist in silos controlled by centralized teams or plutocratic token voting. DeFi is not decentralized. DeFi is not integrated. DXdao is changing this and DXswap is an important step on this journey. I encourage everyone to get more involved. Join keybase. Join the weekly calls. DXswap is currently being tested on Rinkeby. The relayer is going into audit. DAOstack is helping DXdao improve the governance platform.

Ask not what your DAO can do for you, but what you can do for your DAO.


I think it would be good to avoid shaming people having different views (also note that someone made a similar post previously and had then removed it telling that no matter what he says it would be done anyways and it’s better not to show dissent) and keep the conversation on the project, not people. I’ve been following DXswap since May and always had been bearish to its value proposition.

I think releasing dxSwap now would be a flop and a net negative for the dxDAO (reputational damages will be greater than the few liquidity which will get in it).

Changing the fee individually or redirecting it to different actors is not a good enough value proposition to have a new product.
If you think I’m wrong, I’d be happy to make an Omen/Conditional prediction market on the liquidity which would come into it.

To get a successful dxSwap there is a need for a good enough value proposition, it could be:

  • Second layer integration (xDAI or using loopring).
  • Ability to have limit orders.

it was not my goal to shame you but rather clearly point out that your statement is wrong:

  • The promised of DXswap (decentralized governance and fees for platform development) has already been done by SushiSwap and Uniswap.
  • Uniswap has a liquid token governance which is the exact opposite of DXswap governance.
  • At Uniswap only whales can create proposals <=> At DXswap anyone in the world can create a proposal.
  • Sushi swap is in control by bad acteurs via a multisig <=> DXswap is governed by 430 Member and growing DAO with full time developer in place who are actively working on the project since March.
  • DXswap will be ENS native, which means it is in general more secure then any of the competitors. Sure Uniswap can use their ENS but the influence will only be done by huge whales.
  • DXswap will not have any token list because the DAO will maintain the token list, improving the UX as it was before.
  • DXswap pools will have their own governance dashboard (which will merge with the liquidity provision Interface) which will at first, only set the pool fee but can greatly extended to even own DXdao reputation and vote on DXdao proposals.

To get a successful dxSwap there need a good enough value proposition, it could be:

  • Second layer integration (xDAI or using loopring).
  • Ability to have limit orders.

Great points!

As you are (hopefully) aware the DXdao was cloned to xDai and is currently building up its own infrastructure on it. Which means it will first replicate the current system on mainnet (All its connections) and will play a big and important role for all our products as it will govern and have influence of Omen and DXswap on xDai.

A few examples what the DXdao is or will be able to do on xDai:

  • Proposal lifecycle is much quicker because it is way less money at stake
  • Provide Liquidity on DXswap for xDai
  • Change protocol fee, pool fee and delegate ownership of pools for xDai
  • Add/Remove tokens from its token list on xDai
  • Create markets on Omen and provide liquidity to it
  • Do Arbitration for Omen
  • Being an Oracle for Omen
  • Most important point: It is already providing the collective a very cheap way to find consensus.

Jumping in here late after a busy weekend.

Just to recap, there seem to be two separate discussions:

  1. DXdao providing liquidity at a lower price than the bonding curve

  2. Overall DXswap strategy and whether it is a worthwhile strategic choice

I’m very interested in discussing #1 as I don’t have a good answer. Good points brought up by @pulpmachina and @papa_raw about a buyback. The inconsistency comes from the 100k DXD pre-mint. Does the bonding curve prevent DXdao from ever moving these tokens? Or just at a price that is above the bonding curve price? I don’t have the answer to these questions and would like to hear more discussion.

For #2 over the strategy of DXswap,

  • DXswap is a worthwhile product launch for one reason alone: on-chain fees. No other product category has the on-chain fee capability of an Automated Market Maker. Uniswap had $15bn of volume in September. DXswap only needs to capture a tiny fraction of that. No other development work could have a higher ROI for DXD holders and its not even close.

  • What’s ‘different’ about DXswap governance? Not just the ability to govern the protocol, but for each pool to govern itself. AMMs are becoming more specialized and the future is specific curves/strategies for each trade pair. This is not important now, but will be in the future.

  • DXswap is DXdao’s first shot in the liquidity wars - Balancer, Stablecredit, the move to Layer 2 - we are in the midst of a massive battle for liquidity. As a DAO that aims to govern and decentralize DeFi, DXdao needs to think strategically about how to compete, and DXswap will be DXdao’s first foray into the liquidity wars. This first iteration of DXswap will not win the liquidity wars but it will lay the foundation for more. To win the war, you need:

    1. Trade Flow

    2. Lots of liquidity

    3. Super efficient AMM.

    DXswap’s launch should help build the first two, while we work on the last one.

Overall, I think too much focus is on how DXswap will do in the next 3 months and not how it will build long-term liquidity integrations, enhance DXdao’s treasury management and governance capabilities. I’m surprised at everyone crowning sushiswap - this is just getting started. The switch to Layer 2 and Uniswap v3 are going to change everything (again).

@clesaege @two_cheers why do you think DXswap will be a flop? what do you define ‘success’ as? On-chain revenue? Reception by crypto twitter?

Lastly, I think the key advantage (right now) is DXdao’s on-chain treasury. The ability to seed a new protocol and adjust the liquidity to where it’s needed is genuinely new and not on the market ( is the closest corollary but they use outside capital; yam is trying to do this now).


This has been a super good discussion already, looking forward to the call today. Thanks @pulpmachina and @powers for saying much of what I was thinking, better than I could. The power of the DAO!

As a relatively large DXD holder (app 150) and Uniswap LP (app 20%) I can certainly nod to both discussions raised. We want a vibrant market for DXD on both DxSwap, Balancer and Uniswap (and eventually many other places too).

i) If we just launch 300k USD liquidity of both ETH/DXD I am also concerned of it skewing the secondary market for DXD negatively without achieving much in terms of strategic growth. The bonding curve is the main way for DXD to raise new funds and the treasury is still the largest holder of DXD by far, so letting so much new DXD supply out so far below bonding curve price just seems bonkers. Supporting the scarcity and price of the token is in our clear common interest here. Therefore supporting the DXD price by buying up DXD under book value in market and launching the DxSwap pool with that as liquidity seems the easiest choice - no tech involved and it stops new DXD from being released by the treasury for no strategic reason. Alternatively we need to focus a lot on why, as an LP, I should move over from Uniswap and populate the pool? Right now I would compete with DXD liquidity and be paid less in Tx fees, hardly a winner for me… shouldn’t we be winning people like myself over to DxSwap?

ii) That goes to discussion number 2. Why are we better and competitive? I am not 100% sure yet, but keen to see DxSwap launch and us building on the initial deployment. It’s exciting. But we should be very clear about what we think it takes to be competitive for users, LPs and/or projects. Picking one is fine too, as long as we think that can drive adoption of the others in niches/broader. Providing a bunch of short term liquidity can assist a lunch, but won’t cut it in terms of overall competitiveness anyway so my suggestion is we go much smaller.

Just my 2 cents


Some further discussion on this today in DXswap strategy chat. Read call notes here:

It would be great to discuss again on Monday’s Biz Dev call and hear any additional feedback or suggestions. Or here on the forum.