How Does Blackhole CLMM Work?
Blackhole CLMM is a decentralized exchange on Avalanche offering concentrated liquidity, standard AMM, and stablecoin pools. It uses a ve(3,3) governance model where BLACK token holders can lock tokens to vote on which liquidity pools receive emission rewards. Built as a fork of ThenaFi and audited by Code4rena, it also features Genesis Pools for new token launches. Its C+ grade reflects a ThenaFi-based codebase with partially unmitigated audit findings, trivially cheap governance capture at sub-$1M FDV, and a protocol that has shed 97% of TVL as its ve(3,3) emission death spiral materialized.
TVL
$2M
Sector
DEX
Risk Grade
C+
Value Grade
D-
Core Mechanisms
Exchange/AMM/Concentrated Liquidity
Concentrated Liquidity Market Maker (CLMM) pools allowing LPs to provide liquidity within custom price ranges for higher capital efficiency on Avalanche
Standard CLMM design similar to Uniswap v3. Higher capital efficiency comes at the cost of increased impermanent loss risk when prices move outside ranges.
Exchange/AMM/Variable AMM
Variable AMM pools for volatile asset pairs using x*y=k constant product formula with configurable fee tiers
Standard constant product AMM. Provides baseline liquidity for volatile pairs where concentrated liquidity positions may be too risky.
Exchange/AMM/Stable AMM
Stable AMM pools optimized for correlated asset pairs like stablecoins, using stable swap curves for minimal slippage around peg
Standard stableswap design for pegged assets. Lower fee generation but critical for stablecoin liquidity on Avalanche.
Governance/ve(3,3)/Vote-Escrowed Governance
BLACK token can be locked for up to 4 years to receive veBLACK (veNFT), granting voting power to direct emissions to specific liquidity pools and earn protocol revenue
ve(3,3) model adapted from Solidly/Velodrome. Creates strong lock-up incentives but also governance capture risk when FDV is low relative to TVL.
Token/Emission/Emission-based Rewards
BLACK token emissions distributed to liquidity pools based on veNFT holder votes, incentivizing deep liquidity in voted-for pairs
Emission-directed liquidity is core to ve(3,3) model. Creates dependency on continued token emissions for LP incentives — emission reduction could cause TVL flight.
Launchpad/Genesis Pools
NovelGenesis Pools enable new projects to seed pre-TGE liquidity through community-aligned, capital-efficient mechanisms on Blackhole
Genesis Pools add launchpad functionality to a DEX, creating potential for low-quality or fraudulent token launches that could harm LPs and Blackhole reputation.
How the Pieces Interact
TVL collapsed from $68M to $2M as BLACK token fell 97% to $0.002 — the emission-liquidity death spiral played out exactly as the risk model predicted. With unlimited supply and near-zero token price, USD-denominated emission rewards are negligible, leaving no incentive for new LPs to enter. Remaining $2M TVL is sticky/residual capital with no structural support.
At sub-$1M FDV, acquiring majority voting power in Blackhole governance is trivially cheap. A well-funded actor could lock BLACK to direct emissions to their own pools, extracting value at the expense of other LPs. Classic ve(3,3) governance capture risk amplified by token near-zero value.
LPs in CLMM pools setting tight ranges face complete impermanent loss when prices move outside their range. During Avalanche market volatility, LPs can lose 100% of one side of their position with no mechanism to auto-rebalance.
Genesis Pools expose LPs to newly launched tokens with minimal vetting. Rug pulls or failed launches through Genesis Pools could result in total loss of LP capital paired with worthless tokens.
What Could Go Wrong
- ve(3,3) tokenomics model creates complex emission-governance flywheel where veNFT holders control emissions — governance capture is trivially cheap at sub-$1M FDV
- ThenaFi fork introduces inherited codebase risk — Code4rena audit (June 2025) found 2 mitigated HIGH findings and 2 unmitigated MEDIUM findings (griefing DoS on deposits, permit front-running); any undiscovered vulnerabilities in shared codebase propagate to Blackhole
- Concentrated liquidity positions face impermanent loss amplification when asset prices move outside selected ranges, with LPs potentially losing 100% of position value in one asset
ve(3,3) Emission Death Spiral
ElevatedTrigger: BLACK token price declines 50%+ causing emission incentives to become insufficient to attract LPs, triggering TVL withdrawal cascade
- 1.BLACK token price drops significantly as broader Avalanche DeFi sentiment weakens — Emission rewards in BLACK become worth less, reducing effective LP APR
- 2.LPs withdraw from pools as farming yields no longer justify impermanent loss risk — TVL drops, reducing trading volume and fee revenue for veNFT holders
- 3.Reduced fee revenue causes veNFT holders to unlock and sell BLACK tokens — Additional sell pressure on BLACK accelerates price decline
- 4.Reflexive spiral: lower price → lower emissions value → less TVL → less volume → less fees → more selling — Protocol enters death spiral toward minimal TVL and near-zero BLACK price
Risk Profile at a Glance
Overall: C+ (41/100)
Lower score = safer