War Of Decentralized Exchanges
SwissVite is happy to welcome cryptoKaizoku as a guest author in our blog!
Centralization is an abomination! Decentralize everything !
Decentralization is a core principle of blockchain-based technology. The Entire Crypto Community right now is moving in a wrong Direction, moving towards Centralization, Where trading in the volatile market of cryptocurrencies that already comes with its fair share of risks, do we really want to take in any of the centralization-related risks as well? Centralized exchanges are often hacked, Centralized Exchanges are “Honeypots for Thieves” as many Experts Quote. Recently, the sudden death of crypto exchange owner who held private-keys to cold-wallet for QuadrigaCX exchange, the exchange lost nearly $140 million of Users crypto assets.
So Why are we Still Using Centralized Exchanges? At the time of writing, the total cryptocurrency market cap is around $142 billion with just over $33 billion in daily volume. Historically, the top nine decentralized exchanges have accounted for just 0.05% of this daily trade volume(Coinmarketcap)
In general, centralized exchanges make it easy for users to trade crypto and the larger ones rarely suffer from liquidity issues. Sadly, the same can’t be said for decentralized exchanges (DEXs).
The four core functions of any exchange are capital deposits, order books, order matching, and asset exchange. In order to create a fully decentralized exchange (DEX), each of these functions must be decentralized. In most exchanges, only the asset exchange is decentralized, as the assets are cryptocurrencies deployed on the blockchain that no central entity controls. However, the other three functions, and especially capital deposits, are usually centralized. To Solve this issue, many DEXs are competing against Each other in the way we can say so-called as War of DEXs some of the current DEXs are Idex, Switcheo, BlockDX, Kyber Network, etc. On an architectural level, decentralization means that there is no centrally-controlled server(s), and the networks’ nodes are distributed.
Below I have given Brief Information on Upcoming DEXs that are trying to solve the core problems that we are Facing with DEXs. I will not dive deeply into the technical aspects of each DEX, but instead broadly explain Few Unique features of Each DEX and what they aim to accomplish. For those who are interested in the technical aspects Please Read Their WhitePapers.
RESDEX: First Privacy Focused Decentralized Exchange.
ResDEX uses state-of-the-art technology to facilitate atomic swaps securely and reliably. Loosely based on Komodo’s BarterDEX, ResDEX uses the Resistance privacy coin as a base for optional private trading and implements many additional technologies, including Tor support, automated trade privatizing, an extremely user-friendly graphical interface, and more. When a user wants to trade on ResDEX, they simply open up the ResDEX interface in the Resistance Desktop Application and enable coins they are interested in trading. The user then deposits coins into a special exchange address that is derived from their exchange secret seed phrase that only they know. This address is specific to the coin they are trading and each coin has its own derived address. Once an order is placed and a matching trade is found, both parties in the trade perform the necessary steps of an atomic swap before broadcasting their sides of the trade to the underlying blockchains of the cryptocurrencies being traded. What makes ResDEX unique is not just the opportunity it gives users to trade up to 95% of cryptocurrencies peer-to-peer and in private, but the platform’s InstantSwap technology too. ResDEX InstantSwap removes the need for the trader to wait on block confirmations and, by holding decentralized collateral in a Resistance masternode, lets each party in the trade make the swap immediately.
ResDEX is supported by three technological pillars that, collectively, enable users to trade directly and privately.
Atomic Swaps: An atomic swap is a smart contract operation that allows users to exchange one cryptocurrency with another without putting funds in escrow. Following a strict process that holds each party accountable in a trade, atomic swaps can take place directly between blockchains, or off-chain, without the need for a trusted third party Zero-Knowledge proof: Resistance uses zero-knowledge proofs to protect the privacy of transactions on the Resistance blockchain. Encrypted transactions are validated using a Zero-Knowledge Succinct Non-Interactive Argument of Knowledge, or zk-SNARK. Rather than posting sensitive information on the public blockchain for anyone to see, zk-SNARKs verify transactions without revealing any identifying information TOR: Users have the option to route ResDEX network traffic through Tor so they are shielded from network surveillance when finding trades. Tor encrypts data and directs traffic through a distributed worldwide network of relays, or nodes, which conceal sender and recipient IP addresses. Innovation on the Resistance platform doesn’t stop at the exchange. The team’s mission is to make secure, private, decentralized trading accessible to everybody, and they have carefully considered this whilst developing their blockchain too. Resistance splits block rewards and transaction fees over CPU-optimized Proof of Work, masternodes, Proof of Research, and project development. They use a specially designed hashing algorithm, yespower, created by one of their team members to make the mining process more democratic. Practically ASIC-resistant, the algorithm favours the standard CPUs you’ll find in a regular laptop or desktop and offers no benefit to FPGAs/ASICs. This means anyone can compete for mining rewards and the coin won’t be the preserve of mining farms. Proof of Research is an innovative concept where users donate computing power to whitelisted BOINC projects, helping scientists to carry out important research projects. The reward for Proof of Research and Proof of Work is 30%, so there is an incentive to do both. This also gives users who want an alternative to mining another way to earn block rewards.
TomoX, TomoChain’s Decentralized Exchange Protocol
TomoX is a decentralized exchange protocol based on the TomoChain blockchain infrastructure that will be integrated into the core TomoChain blockchain consensus layer. Typically how decentralized exchanges work is they function on smart contracts that help execute actions users want to make. However, DEXs built on the TomoX protocol will be able to bypass the need to create smart contracts in order to build decentralized order books. This is because with TomoX, masternodes in the TomoChain ecosystem will be the ones managing the order book database, matching engine, and trade execution mechanism. This means that decentralized exchanges built for TomoChain using the TomoX Protocol will not need to spend time and money creating as well as auditing their smart contracts but can instead use their funds to market their exchange and build out a good user interface. Moreover The first decentralized exchange platform on TomoChain i.e TomoSwap: Instant Swap with The fastest, simplest and most secure way to exchange tokens. TomoSwap will focus on both user friendliness to end users and liquidity for future financial applications.
TomoSwap will play as the transactional layer to allow assets on TomoChain to be converted seamlessly between end users and other applications.
Main Features of TomoX :
Liquidity: TomoX is a DEX on-chain protocol, So it means no matter how many relayers integrated TomoX operate at one time, there is only ONE tradable order book. All orders from those exchanges will be “stored” in one place only, so let’s say, there are 3 exchanges utilized TomoX Exchange 1 got Tomo/Triip Exchange 2 got Tomo/MCash Exchange 3 got both pair You are on exchange 1, but the liquidity for you to trade will come from a big pool underneath included 3 exchanges’ orders, so you don’t have to worry about the shortage of any token (of course, they are TOMO and TOMO based token), you don’t have to create a lot of accounts on all 3 exchanges, you don’t have to pay excessive fees as well. Full Decentralization: There are two fundamental exchange models as described by many experts currency-centric and currency-neutral. Either of these models can be centralized or decentralized, depending on how the four key functions of the exchange are handled. Even DEX are Divided into two Semi & Fully Decentralized. no matter it’s a DEX or CEX, there are 3 main elements form an exchange
UI — Relayer where users interactsOrder BookMatching Engine Regarding CEX, 2. + 3. will be done off-chain Regarding DEX, like IDEX, the order book is still off-chain, just matching engine is on-chain, via smart contract. To Tomo DEX, both of order book and matching engine are on-chain and it is where TomoX protocol does its job. TomoX is a unique combination of off-chain matching, a decentralized order book database, PoSV consensus and exchange integration. With this unique combination, TomoX’s order confirmation will be almost instant, just as is provided by TomoChain’s PoSV. That’s why TOMO claims Tomo DEX as fully decentralized.
Nash is the most talked about DEX in current market, Being one of the first decentralized exchange supporting NEO’s NEP5 tokens, Neon Exchange hopes to bring high trading volume and advanced features to the decentralized exchange space so users can take advantage of both the convenience of centralized exchanges with the security of decentralized exchanges.
NEX is going to use “off-chain relay” which, instead of executing trades directly on the blockchain, potentially clogging up the network, uses side-chain smart contracts to match orders, and then they are fulfilled on-chain. In addition, NEX will be using an automatic matching engine (which is semi-centralized) to reduce arbitrage opportunities and to allow for more complex trade orders.. Moreover, NEX platform is not just an exchange, but a suite of products that will let users purchase digital assets with National currencies, store and transfer them easily using wallets whose keys never approach our servers, and make online purchases via an integrated payment service. We aim to bring decentralized finance to everyone by making it simple, fast and integrated with everyday life.
The UI is similar to MetaMask, but will include the following features:
Convenient NEO token listings, and transaction capabilities. Transaction history directly on the wallet. Editable contact details. Easy linking to other dApps for purchasing/interacting directly.
ViteX is developed on the Vite public chain and features absolute decentralizations, higher security of digital assets and robust economic models for both sending/receiving transactions and confirming transactions. ViteX is a completely decentralized system.
The Vite DEX (to be released in Q2 2019) advantages include the following:
True decentralization: Transactions matching engine is realized by Smart Contract of Vite Chain. All orders will be completed through the chain and the order book will be stored on it, which make the complete decentralization come true. Thanks to ultra-fast transaction speed and zero fees in the Vite network, Vite DEX will feature on-chain order book and on-chain matching. i. The traceability of the on-chain order book prevents exchanges cheating behaviours, such as fabrication of transaction prices and volumes, which has allowed exchanges to control the market, de-value futures contracts, and feign trading activity.
ii. The on-chain matching prevents the exchange from front-running the customer in the order book, e.g., by inserting the exchange’s buy order in a bull market.
iii. The aforementioned on-chain feature is enabled by, and difficult to implement without, ultra-fast transaction speed of the Vite network. And the zero fees obviate gas for making an order and cancelling an order. Transaction fees bonuses will be distributed through Vite Chain to keep the result completely public and the rules unable to change. Many DEX’s are semi-decentralized, where the order book and matching engine are off-chain due to performance and fee reasons as mentioned above.
Cross-chain gateway: ViteX allow incompatible coins issued on different blockchains to be exchanged directly via Vite platform. E.g., the exchange of BTC and ETH will be made possible on Vite DEX.
REN (Dark Pool)
REN is a decentralized dark pool for atomic, cross-chain trading. This means that individuals, or, more likely, institutional investors can trade in any size of volume without having those details divulged. The protocol works by distributing primary order into fractions across the network. Then, two primary Ethereum smart contracts come into play.
The first is called the Registrar. This contract organizes the nodes of the network in such a way that it would be impractical to attempt the recombination of the aforementioned order fragments. This means that at no point can an order be put back together to reveal its full size, or any other details therein.
Nodes on the network will compute whether or not two order fragments match, and then a smart contract called a Judge will verify the integrity of the trade using a Zero Knowledge Proof (verifying the logic behind a trade without needing to know specific details). Following this, an atomic swap will be triggered (cross-chain trading), and the order executes. The primary function of this network is to provide trustless and anonymous cross-chain trades.
These next generation of DEXs are trying to develop ways to tackle the issues that have held back their predecessors, and I have only touched the Tip of the Iceberg. There are many more DEXs working in their own way to Solve current issues, all I have done is just Introduced you to some User-Friendly DEXs & too many users the atmosphere around DEX is still eerily similar to the late 90s Internet. I would recommend users to start using current DEX just by depositing few 100 bucks, It’s worth getting the hang of a DEX, and you might just find that you like its dynamic more than what you’re traditionally used to. If 2017 was the best year for crypto so far and 2018 a year full of unfulfilled hopes, 2019–2020 seems to be the perfect year to settle the foundation and Switch Towards Decentralization. No Matter Which DEX outperforms the other. It is a the Positive Sign thattherer will be mass adoption for Decentralized Exchanges where we can do Trade/Business together without any Intermediaries.