HumidiFi Lite Paper Revealed: 90% of Tokens Controlled by Team—Can the "Largest DEX on Solana" Support a $69 Million FDV?

HumidiFi—the largest dark pool protocol on Solana, has become the DEX with the highest trading volume on Solana within just six months of launch, accounting for over 50% of the market, and is planning its TGE on December 5.

Let’s talk about the somewhat “cloudy and vague” litepaper HumidiFi has released, and see what exactly HumidiFi is doing.

People are used to categorizing HumidiFi as a “dark pool” project, while HumidiFi refers to its own DEX model as a “Prop AMM” (proprietary automated market maker).

Compared to traditional AMM’s passive k = x * y matching, the Prop AMM is more proactive in three ways:

1. Off-chain computation

It uses high-performance, ultra-low latency servers to monitor prices on centralized exchanges like Binance, Coinbase, etc., as well as on-chain DEX prices.

It uses predictive models to forecast the next market moves.

2. Custom Oracle

It sends the latest prices, market conditions, and inventory updates to on-chain HumidiFi in real time.

3. On-chain execution

Using Nozomi for direct connections with major validators, it reduces latency and completes trades. Of course, the on-chain smart contracts are also responsible for fund management.

Here’s a straightforward example:

1. Traditional AMM

Traditional AMM (k = x * y) determines the price based on the ratio of the two tokens in a trading pair. Large buy actions can cause the price curve to move sharply.

For instance, buying 10,000 USDC worth of TRUMP might result in a slippage greater than 2%.

2. HumidiFi

First, its off-chain servers monitor prices across platforms and find that there’s plenty of TRUMP sell orders on Binance, so the price is relatively stable in the short term.

The oracle communicates this to the on-chain contract, so the contract doesn’t need to significantly raise the price. As a result, traders enjoy lower slippage.

Additionally, the litepaper also mentions two other scenarios: “managing and rebalancing on-chain inventory” and “identifying and penalizing toxic arbitrage (toxic arbitrage) and frontrunning bots (informed bots).”

Specifically, when the LP pool’s token ratio becomes unbalanced—for example, during a downtrend, if there’s too much SOL left in the SOL-USDC pool because users keep selling SOL to the pool in exchange for USDC—

HumidiFi detects the inventory imbalance and associated risk, so it lowers its SOL sell quote.

Suppose the current SOL price on CEX is 138 USDT. HumidiFi can quote 137.5 USDT, attracting arbitrageurs and rebalancing the LP pool’s ratio.

To deal with malicious arbitrage and frontrunning bots, the main strategy is still using Nozomi’s VIP channel to effectively cancel orders before they’re filled.

Therefore, HumidiFi can “transform from a single DEX into a universal liquidity layer for Solana’s internet capital markets”—a phrase also mentioned in the litepaper.

There’s not much to say about the tokenomics: $WET total supply is 1 billion, 90% controlled by the team, 10% fully unlocked at ICO TGE, ICO FDV is $69 million. It’s quite a bargain but the whitelist snapshot has already been taken, so don’t bother thinking about it.

Dark pools, like prediction markets, are one of the recent trends and worth keeping an eye on—CZ has mentioned them before as well.

HumidiFi is currently the most noteworthy project in this space and can serve as a good entry point for learning.

That’s all.