HumidiFi's lightweight white paper reveals: 90% of tokens are controlled by the team; can "Solana's largest DEX" support 69 million FDV?

HumidiFi, the largest dark pool protocol on Solana, has become the largest DEX on Solana in terms of trading volume within six months of its launch, accounting for over 50% of the market. It is scheduled to launch on December 5th via TGE.

Let's talk about this rather cryptic little book that HumidiFi has just released, and see what HumidiFi has done.

People are used to classifying HumidFi as a "dark pool" platform, while HumidFi refers to its own DEX model as a "Prop AMM" self-operated market maker.

Compared to the traditional AMM's passive matching of trades (k = x * y), the Prop AMM is more proactive in market making, which is reflected in three aspects:

1) Off-chain computation

We monitor prices on centralized exchanges such as Binance and Coinbase, as well as on-chain DEXs, using high-performance, ultra-low-latency servers.

Predictive models are used to forecast future trends.

2) Custom Oracle

The latest prices, market conditions, and inventory updates are sent to HumidiFi on-chain in real time.

3) On-chain execution

Nozomi enables direct connections with primary validators, reducing latency and facilitating transaction completion. Of course, the on-chain smart contract also handles fund management.

To give a straightforward example,

1) Traditional AMM

In a traditional AMM (Average Transaction Model), k = x * y, the price is actually determined based on the change in the ratio of the two tokens in the trading pair. Large purchases can cause the price curve to change rapidly.

For example, if you buy 10,000 USDC of Trump, the actual slippage may be greater than 2%.

2) HumidiFi

First, the off-chain server monitored prices on various platforms and found that there were ample sell orders for Trump on Binance, and the price was relatively stable in the short term.

Oracles communicate with on-chain contracts to inform them of the situation, ensuring that the price of the on-chain contract does not need to increase significantly during execution. As a result, traders can enjoy lower slippage.

In addition, the light paper also mentions two scenarios: "managing and rebalancing on-chain inventory" and "identifying and punishing toxic arbitrage and informed bots".

Specifically, when the ratio of the two tokens in the LP pool is excessively skewed, for example, during a downtrend, there is too much SOL reserved in the SOL-USDC trading pool because users are selling their SOL to the pool and exchanging it for USDC.

HumidiFi detected an inventory imbalance, which posed a risk, and therefore lowered its SOL selling price.

Assuming the current price of CEX SOL is 138 USDT, HumidiFI could be offered at 137.5 USDT to attract arbitrage and rebalance the LP pool ratio.

To combat malicious arbitrage and preemptive trading bots, Nozomi's VIP channel is the main solution, allowing for effective order cancellation before orders are filled.

Therefore, HumidiFi can actually "transform from a single DEX into a universal liquidity layer for the Solana Internet Capital Market," a statement also mentioned in the light paper.

There's not much to talk about regarding the token economic model. $WET has a total supply of 1 billion, 90% controlled by the team, and 10% will be unlocked during the ICO TGE. The ICO FDV is $69 million, which is quite a good deal, but the whitelist has already been snapshotted, so don't even think about it.

Dark pools, like prediction markets, are one of the recent trends and worth paying close attention to. CZ has mentioned them before.

HumidiFi is the most noteworthy project so far and can serve as a starting point for learning.

That's all.