Decentralized exchanges are truly having their year in crypto. We are starting to see more decentralization for capital raises facilitated by trustless, non-custodial platforms. This is quite a difference from the Initial Coin Offerings (ICOs) and Initial Exchange Offerings (IEOs) we’ve seen over the past couple of years. The End of the ICO Era Anyone directly involved in ICOs during 2017 knows full well that ICO startups were severely underequipped. Servers got DDoSed, scams were rampant, and team members had scores of doppelgangers asking for ETH deposits. ICO startups had no custodian, no KYC process, and no form of accounting. Usually, they resorted to hiring overpriced ICO vendors who specialized in facilitating capital raises. ICO vendors had virtually zero transparency and were far from any trustless custody of funds raised, which they took a percentage of. Token Generation Events (TGEs) were sometimes executed manually by the ICO startup itself, months after the closing of the sale. Imagine being given a Google spreadsheet of transactions and taking weeks to review which investor submitted what amount. Also, factor in the presale discount they got, if any, and hope that the 12 other members of your team did not miss a single digit. In late 2018 and throughout 2019, centralized exchanges began to take hold of these campaigns. This allowed for some synchronous marketing strategies, and stress taken away from their clients. However, investors still had the burden of dealing with centralized exchanges and their own slew of issues. Luckily, it’s not 2017 and we have more options for doing efficient and transparent token sales with settlement as quick as an Ethereum transaction. How exactly did IDOs (Initial DEX Offerings) begin, and will they all vary according to the exchanges they run on? Ironically enough, the first Initial DEX Offering began with the largest international centralized exchange brand, Binance. Raven Protocol introduced the RAVEN/BNB token pairing on Binance DEX in a 24-hour sale. Unfortunately, a group of users purchased the first $500,000 worth of RAVEN at the base price in less than a second. What emerged shortly after was a sell order at a . much higher price point A lot of retail participants were outpaced and out-bid. While fully facilitated by Raven, the first IDO required a vote from the validators of Binance Chain in order to ratify the listing of RAVEN. Customers were still asked to complete KYC, so while it was the first mover, Raven Protocol’s IDO still had some qualities of centralization. A step in the right direction One noteworthy Initial DEX Offering was UMA protocol on Uniswap, the most talked-about DEX in 2020. 2% of UMA Network’s token supply was allocated for this release with a price of ~$0.26 at an implied market cap of $26.67M. The Risk Labs Foundation provided a liquidity pool of 2,000,000 UMA and 2,550 ETH on Uniswap. The importance of this detail is because of Uniswap’s Automated Market Maker function (x*y=k). To purchase UMA tokens was to move the price slightly, so in practice, the price started at >$0.26. The average price of the sale was $0.52, however, the peak price was at a whopping $2.18. Because of single-price clearing, a large percentage of buyers were purchasing UMA at above the equilibrium price of $1.04, netting them the shorter end of the stick. While overall a successful decentralized take on the token sale, how can we minimize the front-running and ensure price fairness among buyers for future IDOs? We have one possibility with Defi Money Market’s public sale on June 22nd, featuring not one, but two DEXes. Mesa is a frontend built on the Gnosis Protocol. The unique factor in this exchange is its implementation of ring trades, which are designed to maximize liquidity and reduce frontrunning due to its 5-minute batch settlements. Dolomite is a DEX incorporating Loopring’s anti-frontrunning software, only using the Ethereum blockchain for critical pieces of the trading process (i.e. settlement). So how would the public sale for Defi Money Market’s DMG token play out? Limit sell orders have been placed in multiple groups of 83,333 DMG for each of the trading pairs spread across Mesa exchange and Dolomite. Each consecutive grouping of DMG increases 1.5% in price from the previous, enabling gradual and organic price discovery to occur as DMG is purchased. Three price blocks at a time will be available on both exchanges. When it comes to settlement and reducing frontrunning, these two exchanges demonstrate different strategies. Dolomite incorporates Loopring’s patented anti-frontrunning software, ensuring only Dolomite is able to settle trades that exist on its order books, and no one else can circumvent the backend server to settle trades. FYI, Dolomite uses a centralized server to manage order book-related tasks, such as placing orders, canceling orders, etc. The centralized server’s key is what authorizes trades, without ever being accessible by Dolomite’s team. Dolomite remains non-custodial, using Loopring Protocol’s smart contracts to enable fast, transparent, and atomic settlements that cannot be circumvented. Mesa is taking the more “purist” decentralized route, as the exchange is hosted and governed by the DXdao, a global DeFi organization that makes decisions collectively and on-chain. Mesa will have the same allocations and price points of DMG as Dolomite, but with a different process. The Settlement is done using the Gnosis Protocol to perform batch orders. Unlike any other DEX before it, Mesa groups together orders into 5-minute batch auctions, which ensures that multiple parties will have their orders filled. External “solvers” provide the most optimal settlement solutions to the smart contract to maximize trader welfare. While also non-custodial, Mesa does require an “enable” function to onboard your crypto to the platform, which does add extra gas-steps to the process. Closing Mesa and Dolomite will not have any advantage over token prices or the amount of DMG available to their users. Customers will be driven mostly by individual preference and arbitrage opportunities when taking part in this IDO. Both exchanges have the common goal of bringing new DeFi products and assets to the community in a way that promotes efficiency and transparency. Follow me on Twitter This article is for informational purposes only. Please seek independent legal and financial advice in your jurisdiction before making any investment decisions. Disclosure: The author is a reputation holder of the DXdao, which governs Mesa.eth.

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