Over the past two years, the overall decentralized finance (DeFi) market has taken the world by storm. As a matter of fact, over 2020 and 2021, the DeFi space grew exponentially by over 10x across the two years. According to data on DeFi Pulse, the total value locked (TVL) on DeFi platforms reached a high of $10.55 billion in January 2020. It exploded to an all-time high of $110 billion in November 2021 before slightly dropping in 2022 to $75 billion as of writing.
Decentralized exchanges (DEXs) such as Uniswap and Sushiswap, which rank as the second-largest sector of DeFi only behind lending services, played a huge role in boosting the growth of the DeFi ecosystem. Over the past two years, the total locked value of assets on DEXs has grown over 1000x to $24 billion as the crypto community demands more decentralization and control over their assets.
Image: DeFi Pulse
The DEXs field has grown exponentially for a good reason, as Vitalik Buterin, co-founder of Ethereum, explained in 2020. First, DEXs offer users a better and simpler-to-use interface than centralized exchanges. In Vitalik’s words, “no one who isn’t a professional trader should need to look at an order book in their life” – he explained in reference to the complex nature that centralized exchanges are set up. Additionally, DEXs allow everyone to access the crypto ecosystem. All they need is a crypto wallet. There’s no need to create an account to trade, deposit or withdraw funds.
However, decentralized exchanges are still long from matching their centralized counterparts. As a result, while the DeFi sector has experienced exceptional growth in the short term, there are still a lot of developments and upgrades needed to match centralized exchanges. One of the biggest barriers to growth is that DEX volumes are likely to remain tied to the popularity of the underlying set of assets available for trading.
Notwithstanding, DExs still face scalability issues, slow transactions, lack of accurate oracles, and many more issues that CEXs outperform. This article focuses on some of the DEXs being built to solve these issues, focusing on their value propositions and future prospects in the DeFi ecosystem.
Avalanche-based DEX, Pangolin, starts off our list. Launched in 2021, Pangolin aims to solve the major issues in the DEX ecosystem by offering users a wide range of utilities and an easy-to-use UI. First, Pangolin can finalize trades fast and cheaper than other options in the market. Building on Avalanche, a scalable solution, enables users to swap assets while enjoying sub-second transaction finality and transaction fees as low as a few cents. This matches the speeds on centralized exchanges while offering lower trading fees.
Secondly, Pangolin also provides superior technical upgrades to the industry-level DEXs. Finally, the platform is a community-driven project giving users a voice on how the platform functions and governance decisions on the upgrades and proposals made by developers. The native governance token, PNG, enables the community to drive the development of the product in full.
Lastly, Pangolin completed the first 100% community-focused token distribution, meaning all native $PNG tokens were distributed directly to the community. This aims to provide a decentralized token model with no allocations to the team, advisors, investors, or insiders.
The DEX ecosystem has grown over the past years, but data remains a key issue in the field. Oraichain, an AI-powered oracle system, aims to solve this issue by allowing DEX projects to connect to external data sources. In addition, Oraichain is a bridge that brings AI to smart contracts offering a full suite of services that ensure higher quality data on DEXs.
Apart from providing an oracle service, Oraichain also provides an AI marketplace that allows customers access to look up and choose an ever-increasing selection of AI algorithms and models from different providers worldwide. As a result, they can develop their applications and integration of AI services to increase application functionalities and values.
Oraichain launched its DEX, OraiDEX, a 100% CosmWasm smart contract-based platform, allowing users to swap Oraichain’s native token and OW20 tokens on the blockchain. In addition, the DEX also supports EVM-based blockchain tokens via its OraiBridge, ATOM, and other Cosmos tokens through its IBC integration. The launch of OraiDEX follows the recent major upgrade of the Oraichain Mainnet to version 2.0, introducing Layer 2 Rollups to accelerate its AI Oracles and service execution subnetworks.
Finally, Polkadex, a Polkadot-based DEX, rounds off our list. Launched in 2020, Polkadex provides a DEX that leverages the advantages of centralized exchanges to give users a fast and cheap trading platform. The platform is built for all traders, with users getting the security, privacy, and decentralization that a DEX offers without compromising any part of the trading experience.
The goal of Polkadex is to create a fully decentralized platform for exchanging tokens in a peer-to-peer trustless environment while additionally enabling high liquidity, lightning-fast transaction speed, and advanced trading features such as high-frequency trading and trading bots. Polkadex was bootstrapped by a Web3 Grant at the initial stage of the project to develop the original idea and was accepted as a member of DeFi Alliance.
The Polkadex team recently announced their bid to join the Polkadot parachain auctions, its second time, after falling short the first time. As a result, the Polkadex Crowdloan is live once again, and Polkadex supporters can now loan their DOT to help Polkadex earn a parachain slot. The latest batch of the auction reduces the auction cap to 1 million DOT while maintaining the 2 million PDEX (10% of total supply) dedicated to the Crowdloan. This ratio means Polkadex Crowdloan contributors will take home at least 2 PDEX per DOT contributed.
A win in the latest Polkadex crowdloan could see the popularity and value of the decentralized exchange soar while growing its liquidity significantly. A must watch in 2022!
With the decentralized finance sector growing by the day, users are gradually switching from centralized exchanges to DEXs. The three DEXs above open up an amazing opportunity for the ecosystem, giving users fast, cheap, and convenient channels to trade cryptocurrencies and other virtual assets.
This post was last modified on Apr 12, 2022, 12:24 BST 12:24