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The more I discuss Multidex with Fable the more bullish I get.

As always NFA, not recommending investments, and I’m no financial expert.

But here’s the picture that is starting to dawn on me, after intense debates with Fable, and also with @NebulaOnIC :

Multidex is not made to attract the standard DeFi liquidity in the form of ”mercenary” Market Makers (MMs) who go wherever the ”bribes” (subsidies, free tokens, other advantages) and the MEV opportunities are greatest. It’s built to attract a more slow moving, but potentially much larger, capital base.

Multidex is for patient capital, that wants to park their BTC and USD somewhere safe with reasonable yield for long term. They don’t want to have to hop around between Binance Chain one day, Solana the next, then Robinhood-chain, just to follow the crowd that keeps jumping ship as soon as the subsidies they came for run out, all for a lot more work and risk but not that much greater yield, especially for larger positions.

To this crowd, if Multidex can provide similar yield at lower counterparty risk than a CEX, it becomes interesting. It may take a while, such capital moves slowly and wants to see a lot of proof, but the huge upside is that it’s real - not pumped by subsidies. This capital once it moves in isn’t quick to move out again as soon as subsidies end.

@dominic_w has a long record of stating he does not want to pump ICP price with the help of mercenary markets makers. That means the MMs that only come for the subsidies and leave when they end, turning the token/project into another pump and dump.

Some thought he must have changed his tune on such MMs and DeFi with Multidex. But that doesn’t seem the case. Instead he’s built what looks like a dream machine for non-mercenary, serious capital.

In a nutshell, Multidex tries to replace every extractive middle man in the market with machines that fulfill the same role but at minimal profit. What profit it does accrue for itself (what’s not shared with liquidity providers) goes to keeping the exchange in gas, and any surplus above that goes to the network and NNS DAO that hosts it by burning ICP.

By creating a sophisticated and atomic trading machine with minimal extraction opportunities, and where all parked capital has the same market making conditions via the AMM Vault, it becomes a serious venue for traders to get the best deals and for non-mercenary, long term capital to rest safely and at potentially quite decent yield.

Multidex will need to prove several things. Some will be able to be verified in the play run with play money - that mechanisms like liquidations work like they should, that everything is transparent, that the oracle lag is acceptable and doesn’t lead to big losses in times of volatility.

But many things can only be proven once play time is over, with real capital. HFT bots, that could be a problem (in theory not, according to Fable, in practice…we’ll see once real money is on the line) won’t bother trading for play money.

It’s likely that capital, if it comes, will come slowly. First see that ”X” amount seems to rest safely, then deploy a little more, proving the protocol can handle more, and so on. This is similar to how capital enters BTC - the more value the protocol can handle without getting hacked (by now +$1T) the more it is safe to deploy.

But the flip side is the capital also leaves slowly - if it leaves at all. That’s how I like it. Solid, long term, real execution creating real values as the moat. This is how Dom and Dfinity builds. Multidex makes total sense in this perspective.

Multidex will need to be bootstrapped, seeded with initial liquidity. Someone has to be first out on the dance floor and take the risk to prove the machine. I don’t necessarily expect this will happen on its own.

Dfinity will presumably have to provide this seed liquidity. But it would make sense for them to do so: if Multidex is successful it would provide returns on their investment and potentially improve ICP price, making their holdings more valuable. Long term, much of the credibility will have to come from a much more decentralized liquidity, but to prove the engine it will work fine and can benefit Dfinity and all ICP holders. NNS stakers gain control over its first (potentially) profitable business and goes from just network governance to potentially something even more interesting.

There’s a lot I still have to understand, and rely on Fable’s patient explanations for. But the more I understand, the more it all comes together and the more brilliant it seems. I will post more where I try to go into more detail how and why, but this is the general outline of a picture that is becoming more clear by the minute. And, pertinently, Fable seems very enthusiastic and thinks the whole puzzle makes a lot of sense, so there’s that.

But the bottom line is Multidex is making me more bullish on ICP than I have been in a long time, it perfectly showcases ICP’s advantages because it really couldn’t be built anywhere else, not with all the pieces coming together into such a coherent whole. It is built to attract much bigger and more serious capital than the ”crypto casino”, and if it gains volume it will lead to not just gas being burned but ICP being burned as well - this fact, and that Multidex doesn’t have its own token (beyond ICP) seems to be one of the things that impresses Fable the most.

In short, alien tech again and Dom is ahead of everyone as per usual.