Overview
Kim Exchange is the leading decentralized exchange on Mode Network, an OP Stack Layer 2. Kim implements the ve(3,3) model popularized by Andre Cronje's Solidly, combining vote-escrowed token governance with concentrated liquidity AMM mechanics. As Mode's primary liquidity venue, Kim plays a critical infrastructure role in the growing Mode ecosystem.
The ve(3,3) model aligns incentives between liquidity providers, token holders, and protocols. Users lock KIM tokens to receive veKIM, which grants voting power over emission distribution to liquidity pools. External protocols can bribe veKIM holders to direct emissions to their pools, creating a flywheel of liquidity incentives. This model has proven effective on other L2s — Velodrome on Optimism and Aerodrome on Base are the most successful examples.
Kim's success is intrinsically linked to Mode Network's growth. As Mode attracts more protocols and users, Kim benefits as the default liquidity layer. Conversely, if Mode struggles to gain traction, Kim's volume and TVL will stagnate regardless of its own quality.
Smart Contracts
Kim implements a concentrated liquidity AMM (similar to Uniswap V3) with the ve(3,3) token layer on top. The concentrated liquidity model allows LPs to provide liquidity within specific price ranges for improved capital efficiency. The gauge system manages emission distribution based on veKIM votes, and a bribe contract allows protocols to incentivize votes for their pools.
The contracts follow well-established patterns from Solidly, Velodrome, and Uniswap V3 — battle-tested code with known properties. The combination of concentrated liquidity with ve(3,3) mechanics is the current state-of-the-art for L2 DEX design. Code is typically forked and modified from these established implementations.
Security
The contracts inherit security properties from well-audited Solidly and Uniswap V3 codebases. Kim-specific modifications require independent auditing, and the complexity of combining concentrated liquidity with ve(3,3) creates edge cases that could be exploited. The Mode Network environment adds L2-specific considerations (sequencer downtime, bridge security). No major exploits have been reported on Kim specifically.
Liquidity
Liquidity is reasonable for a new L2 DEX, with core pairs (ETH, USDC, MODE) maintaining functional depth. TVL has grown alongside Mode Network's ecosystem development. The ve(3,3) model effectively bootstraps liquidity through emission incentives, and bribe markets ensure emissions flow to high-demand pools. However, overall liquidity is still modest compared to major L2 DEXs (Aerodrome on Base, Velodrome on Optimism).
Adoption
Kim has established itself as the default swap venue on Mode Network, capturing the majority of on-chain trading volume. Mode's growing ecosystem (lending protocols, yield vaults, stablecoin projects) drives organic trading activity through Kim. Protocol adoption of the bribe system is healthy, with multiple projects actively directing emissions. The limitation is Mode's overall ecosystem size, which constrains Kim's total addressable market.
Tokenomics
KIM follows the ve(3,3) model: emissions distribute to liquidity gauges based on veKIM votes, creating a circular economy. Token holders lock KIM for veKIM to earn trading fees and bribe revenue, while LPs earn emissions. The model is well-designed and proven on other chains. The risk is emission dilution if ecosystem growth doesn't keep pace with token inflation — a common challenge for ve(3,3) DEXs on smaller chains.
Risk Factors
- Mode dependency: Entirely dependent on Mode Network's ecosystem growth
- L2 competition: Competes indirectly with DEXs on larger L2s (Base, Arbitrum, Optimism)
- Emission sustainability: ve(3,3) model requires continuous growth to maintain token value
- Concentrated liquidity complexity: LPs face impermanent loss in concentrated positions
- Smart contract risk: Combined CL + ve(3,3) increases contract complexity
- Mode sequencer risk: Centralized sequencer downtime can halt trading
Conclusion
Kim Exchange is a well-implemented ve(3,3) DEX that serves as critical infrastructure for Mode Network. The tokenomics are sound, the concentrated liquidity provides capital efficiency, and the bribe market creates healthy incentive alignment. Kim's ceiling is Mode's ceiling — if Mode becomes a significant L2, Kim will be a successful DEX. The execution quality is high, but the bet is fundamentally on Mode Network's ecosystem trajectory rather than Kim's independent merits.