Blockchain, cryptocurrency and DeFi writer exploring the innovations of tomorrow.
DEXs (decentralized exchanges) have become increasingly popular within the cryptocurrency world in recent months, as they provide traders with an alternative to centralized exchanges that essentially hold and control user funds.
Today’s popular DEXs are still blockchain specific, with Ethereum-based solutions leading the charge; Uniswap was deployed to the Ethereum mainnet back in November 2018 and has since exploded both in popularity and valuation, with a current market cap of around $16 billion.
Sushiswap was later forked from Uniswap and is another leading DEX platform running on Ethereum. Binance Smart Chain and Polygon (formerly Matic) have since emerged with various DEX solutions on their respective blockchains, including PancakeSwap and QuickSwap, offering users alternatives to Ethereum’s sometimes high GAS fees and long transaction times.
The Polkadot blockchain is the lovechild of once Ethereum core developer Gavin Wood and is one of the most exciting blockchains to have emerged in recent years; the ever-expanding Polkadot ecosystem has over 250 projects (including dApp platform Plasm, Smart Contract platform Moonbeam and Operating System parachain Clover) on its innovative parachain infrastructure that is supported by Substrate. Referred to as the ‘blockchain of blockchains', Polkadot enables private and public blockchain apps to exchange data in a trustless and decentralized environment.
With the eyes of the blockchain community fixed on Polkadot’s crowd loan (PLO) events, there will undoubtedly be an influx of both platform participants and traders on the platform in the coming months. It, therefore, comes as no surprise that DEXs are today being built throughout the ecosystem in order to give users a place to trade the various tokens that power projects built on Polkadot and it’s parachains.
Below are four promising platforms and protocols that offer Polkadot users decentralized token swapping functionality and a lot more besides.
With a mainnet launch scheduled for Q3-Q4 2021, Polkadex looks to bridge the gap between DEX and CEX, enabling users to utilize features that are traditionally only available on centralized platforms, such as margin trading, but in the self-sovereign DEX environment that sees them keep complete control of their funds at all times.
Built on Substrate, the order book-based DEX is more than just a simple swap protocol, as it also enables users to place market orders and limit buys/sells, as well as trade their assets for fiat or even delegate their assets to third parties for use with bot trading and the likes.
Central products and features within the Polkadex suite include:
The Polkadex Orderbook can support up to 500,000 transactions per second with low latency, made possible using its unique TEE architecture, and is the flagship product of the Polkadex platform. The order book supports both Ethereum and Substrate-based assets; the Polkadex team will connect to Ethereum via Snowfork, a trustless bridge, and, once complete, users will be able to lock up their assets in Ethereum and trustlessly bridge liquidity to Polkadex.
Polkadex IDO is a one-stop-shop efficient solution for all the activities from conducting the fundraise to listing tokens on Polkadex exchange fully on-chain. The IDO platform will be the easiest way to deploy tokens and distribute them among IDO participants. Teams will receive an end-to-end product that allows them to create tokens, bridge to other networks, list in the Orderbook, conduct IDOs and also finally migrate to their own blockchains later on in the project’s development. It’s a full governance-driven DAO using on-chain randomness to select lucky participants.
Polkapool tackles the often unmanageable Gas fees and transaction times that plague traders on the Ethereum network with the introduction of feeless swaps; as a DEX AMM (automated market maker) inspired product, Polkapool also eliminates front-running with fast transaction fees on the Polkadot blockchain.
Polkapool will also take advantage of Polkadex’s cross-chain bridges and allows for interoperability between tokens and liquidity on different blockchain networks. Polkadex’s “Fluid Switch Protocol” helps investors to park funds and earn interest as part of its Perpetual Liquidity Mining program powered by blockchain rewards, making sure that Polkadex can offer traders and liquidity providers continuous liquidity and eradicating slippage issues.
Polkadex low latency Orderbook also allows for high-frequency and algorithmic trading, with users able to set buy and sell orders through third-party bots whilst still retaining custody of their funds. Bots will handle both institutional and retail customers.
Polkadex also plans to introduce a fiat on-ramp function with Polkadex Fiat, meaning that DeFi users will have more options to choose from when exchanging their assets. The platform aims to make powerful trading tools more accessible to DeFi users while maximizing liquidity and cross-chain support. Polkadex received funding from Web3 Open Grants Program and is also partnered with CMS, Cluster, Blocksync Ventures, Existential Capital, and others.
“At Polkadex we are combining the benefits of centralized and decentralized exchanges to create a revolutionary decentralized cryptocurrency trading platform built for newcomers, experienced DeFi users and institutional traders alike.”
Zenlink is an exciting Polkadot-based cross-chain DEX that enables users to swap any crypto asset across Polkadot’s parachains seamlessly and safely. Zenlink aims to build a “cross-chain DEX network” with the introduction of a powerful DEX module and aggregator that any Polkadot-based project can utilize for themselves.
Zenlink differs from others on this list, as it essentially has the power and functionality to connect the liquidity of all projects and parachains built on Polkadot; amongst the main products, Zenlink offers a pluggable DEX module that allows different parachains to have DEX capabilities with just one-click.
Zenlink consists of two innovative core products:
Zenlink DEX protocol is the underlying cross-chain DEX protocol for parachains to interoperate and share liquidity pools. It is built on the XCMP protocol developed by a team led by Gavin Wood, Founder of Polkadot.
The cross-chain protocol on Polkadot can be compared to the traditional TCP/IP protocol. The XCMP protocol is similar to the data link layer on TCP/IP, which solves the transmission function of the indiscriminate perception protocol between each chain (route).
Zenlink DEX Protocol is similar to the application layer on TCP/IP. As long as a parachain implements Zenlink DEX Protocol, it can share all the liquidity pool of parachains on Polkadot.
Zenlink DEX Protocol introduces into the Polkadot ecosystem a simple yet powerful and highly versatile pluggable DEX Module, that gives parachain project teams the power to access and offer DEX capabilities to users. Notably, the ability to replace and upgrade Zenlink DEX modules means that systems can be easily customized and improved with minimal friction for project teams. The Zenlink DEX Protocol will be implemented in three forms: Module, WASM, and EVM.
Once the Zenlink Module is deployed on a Polkadot-based platform or parachain in a “plug-and-pull” style, projects can connect with others and share liquidity across the entire network, representing an exciting move forward for the Polkadot ecosystem as a whole. Liquidity pools are formed in each parachain after deployment of the Zenlink Module, with a powerful DEX Aggregator then opening the liquidity pool across parachains to enable liquidity sharing between the DEX Module on different parachains.
Zenlink promotes more overall growth in the ecosystem and encourages robust connections between Polkadot’s various parachains with the introduction of liquidity sharing capabilities; sharing of the DEX orderbooks across parachains also means a smooth and superior trading experience for users in the Polkadot ecosystem as the overall platform steps further into the limelight. Zenlink also integrates Chainlink’s price oracles to power the DeFi products that are being built with its cross-chain DEX modules.
The Zenlink DApp is a front-end interactive product that ensures a smooth user journey and a “one-click” trading experience. By performing actions on the back end, such as path searches for trading pairs that may not yet be supported, the Zenlink DEX DApp takes the logic out of the hands of the user and enables a simple and unified trading experience with low slippage and rapid transaction finality.
The Zenlink DEX Protocol will be integrated into Shiden and Bifrost soon according to recent team updates and, having already partnered with several parachain auction-winning projects such as ChainX, Plasm Network, Phala Network, and Math Chain, the Zenlink team are on a mission to unite the many pioneering projects being built on Polkadot in a bid to unlock the liquidity that is currently siloed within each of the parachains within the DOT ecosystem. The project has already received two Web3 Foundation grants, the second to develop the DEX smart contract implementation, which is open-source in line with Polkadot’s ethos of a decentralized web and also secured a $1.1M angel round of funding that was led by Continue Capital, Hashkey, D1 Ventures, IOSG Ventures, and Youbi Capital.
“As an important protocol layer project in the Polkadot DeFi stack, Zenlink will play a key role in connecting the huge liquidity of the Polkadot DeFi ecosystem, such as helping parachain projects to deploy DEX and achieve liquidity sharing with one click, linking all DEX aggregation liquidity on the Polkadot.“
Hosted on the SORA 2.0 network, Polkswap’s DEX is another project supported by the Web3 Foundation Grants Program and it’s focus on interoperability looks to connect the rest of the blockchain development world with the Polkadot ecosystem as a non-custodial liquidity aggregator and cross-chain AMM DEX.
Behind the colourful and friendly branding of Polkaswap sits a powerful product aiming to bridge the gap between the broader crypto landscape and the quickly growing Polkadot ecosystem; Users can add tokens from the Polkadot ecosystem as well as from other blockchains to the platform’s exchange, opening up a world of new trading opportunities for both ERC-20 tokens and assets from any other blockchain that can be connected to Polkadot. Built on Substrate with scalable Hyperledger Iroha v2 and written in Rust, Polkaswap looks to offer users rapid transaction finality and lower gas fees than Ethereum-based DEXs.
Polkaswap’s codebase is open-source and anyone can add liquidity sources by making contributions to the Polkaswap codebase. The project has been contributed to by Soramitsu, a Japanese firm and “global technology company delivering blockchain-based solutions for enterprises, universities, and governments”.
Polkaswap is constructed upon SORA Network, which utilizes Substrate and includes bridges to many other blockchains, including Ethereum and Bitcoin. SORA Network is looking to have its own parachains for Polkadot and Kusama and will have its own set of validators in the future. The Soramitsu team are the developers behind SORA Network and have also developed solutions such as Kagome, a C++ implementation of the Polkadot Host, and the C++ Filecoin implementation. They are also collaborating with the National Bank of Cambodia to develop Bakong, an integrated fintech payment system.
The native PSWAP token was introduced after community governance and serves as a utility and governance token used to reward liquidity providers on the platform. PSWAP tokens are burned with transactions and decrease in supply over time, with a 0.3% fee (the same as Uniswap) for every swap used to buy back tokens; new PSWAP tokens are minted to reward liquidity providers. Rewards to liquidity providers started at 100% of burned trading fees but will gradually be reduced to 35% of daily burned tokens after 5 years.
Polkaswap’s native PSWAP token was not made publicly available via IDO but instead was rewarded to users who provided liquidity for specific Sora.farm pairs over several months. In total, 3.5 billion PSWAP tokens were issued as farming rewards, with further tokens distributed through the build-up of reserves in the token bonding curve for SORA v2 and issued as rewards to market makers on the Polkaswap DEX.
Peer-to-peer fiat to crypto transactions and fee-less transactions are some of the releases outlined on the Polkswap roadmap in the coming months.
“Polkaswap is a non custodial AMM DEX designed uniquely for the Polkadot ecosystem and the interoperable future. Polkaswap aims for liquidity, security, convenience and a user-friendly interface, where an immediate exchange of assets can take place.”
Karura is not only a DEX-focused platform being built within the Polkadot ecosystem but is a scalable, EVM-compatible DeFi suite that was founded by the Acala Foundation. The platform offers an array of DeFi applications such as a trustless staking derivative named liquid KSM, a multi-collateralized stablecoin backed by cross-chain assets named kUSD, and an AMM DEX trading platform. The DEX specifically was successfully launched and went live for trading on Polkadot’s canary network Kusama near the end of July 2021.
Karura Swap allows for users to trade directly between an expanded selection of token pairs away from centralized exchange listings. New tokens can be quickly added to Karura Swap through governance; fresh trading pair listings are approved through governance, and pairs can be added quickly to the platform without the need for intermediary or centralized involvement. Karura Swap's novel design that was inspired by the “constant product formula” (first introduced by Uniswap) also allows for users to transact in illiquid markets, enabling the swap of any token to any other token in a single transaction provided there is a path between the two.
TVL (total value locked) on KaruraSwap hit $35.65M on August 9th 2021, with an initial TVL of over $3.4 million USD locked in by utilizing a “Bootstrap feature,” which allows a liquidity sandbox for trading pairs. This warm-up period essentially encourages a pool to reach adequate liquidity before going live, also aiming to tackle frontrunning and market manipulation.
Karura won the first Parachain Slot Auctions conducted by Kusama recently with 501,000 KSM (equal to over $100 million USD at the time of writing) raised by the Karura and Polkadot communities. As part of what aims to be a complete DeFi package, Karura enables users to swap, borrow, lend, earn, and more all in one spot.
“Karura Apps offer the ability to trustlessly trade tokens without intermediaries through Karura Swap. Karura Swap is a trustless, automated market maker (AMM)-style decentralized exchange on the Karura network. Karura Swap supports the ability to trade native Substrate tokens and ERC-20 tokens.”
The future of Web3 is seemingly unstoppable, and the cryptocurrency world is sure to benefit from the various solutions and products explored above, with several pioneering projects now offering DEX functionality within the Polkadot ecosystem. Although some are offering different solutions than others, the overall goal to incentivize growth within the blockchain industry remains the same, and the above projects are shining examples of what can be achieved when utilizing both Polkadot’s and Kusama’s exciting infrastructure.
What is the DEX solution on Polkadot that gets you most excited right now? Let me know on Twitter!
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