[ad_1]
As part of decentralized finance (DeFi), decentralized exchanges (DEX) are currently receiving widespread attention. The global market value of cryptocurrencies hit a record high in 2021.In addition, new blockchain trends such as Irreplaceable tokens (NFT), is pushing cryptocurrency to the forefront of blockchain news.
DeFi continues to receive attention and is becoming more and more popular, as do DeFi certification courses. The trading volume of DEX exceeded US$11 billion in August 2020.Although centralized exchanges (CEX) are now dominant Cryptocurrency trading, Decentralized Exchange (DEX) is quickly gaining attention among technicians and the blockchain community. For example, Uniswap is a DEX that processes $2 billion in transactions every day.
In this article, we will discuss DEX in detail.
Understanding DEX
A DEX (Decentralized exchange) Is a cryptocurrency exchange that operates independently of a third-party central agency. Users can fully control the assets held or exchanged on the DEX. DEX is more secure than CEX (centralized exchange). To run a decentralized exchange built on the Ethereum blockchain requires an Ethereum smart contract.
The difference between DEX and CEX
To understand DEX correctly, let’s first understand the difference between DEX and CEX.
Autonomous financial protocols supported by smart contracts and peer-to-peer payment systems, such as Pancake swap Or Uniswap, which is DEX. Traders can send digital assets to others through DEX, and all transactions are recorded and visible on the blockchain. It does not require an intermediary to clear transactions. Instead, smart contracts are used to execute and verify them. At the same time, CEX such as Binance is an online trading platform that connects buyers and sellers through an order book. They are popular and dominant online trading platforms based on the concept of online brokerage. Centralization and ownership are the key differences between DEX and CEX.
centralization
The area of coordination and execution of instructions is called centralization. All services in DEX are managed and controlled by smart contracts or repeaters that form a network of trusted nodes.
The order book in CEx is responsible for evaluating and confirming received orders to ensure that users are matched correctly. The execution of the transaction is further carried out by the exchange software and the server in the second stage. On the other hand, DEX does not use any intermediary and facilitates the exchange of encrypted assets through smart contracts for transactions.
ownership
Ownership is the authorization control over the exchange account key. When trading on a decentralized exchange, users own all the assets in their personalized wallet. When trading on a non-custodial DEX platform, users retain control of their private keys. They can use the wallet to select, submit, and confirm transactions, treating the exchange as a matching service. Users can match, and then use smart contracts to cancel the match on non-custodial exchanges.
On the other hand, CEX is managed. Therefore, users cannot fully control their encrypted assets. For example, users who buy bitcoin on CEX do not yet own these coins. Therefore, before buying Bitcoin, they must request that the coin be added to their external wallet address.
Requires DEX aggregator
The introduction of 1inch MVP proved the need for DEX aggregators. At the 2019 ETH New York Hackathon, Anton Bukov and Sergej Kunz produced a 1inch MVP in 18 hours. They do this only because they need it for personal reasons. “1inch’s main consumers are Sergej and me,” said Anton, the company’s CTO.
It is inefficient and tedious to manually check the best trading prices of all DEXs such as Uniswap, Kyber and 0X before trading.
A practical algorithm is needed to scan each DEX to get the best transaction price and immediately provide the best transaction, just like other cryptocurrency users.
In order to get the best and economic exchange price, you must search for the best price among all DEXs. However, manual screening is inefficient and does not allow complicated trade networks and routes. Therefore, the DEX algorithm plays a vital role in reducing transaction costs. As a result, DEX aggregators have witnessed tremendous growth consistent with the growth of DEX trading volume in recent months.
How does the DEX aggregator work?
The main goal of DEX aggregator is to provide customers with a better exchange rate than any other platform in the shortest transaction time. In addition, protecting consumers from costs and reducing the possibility of transaction failure are some of the other important goals of DEX.
The DEX aggregator aggregates liquidity from multiple DEX, allowing users to obtain a higher token exchange rate than a single DEX.
DEX aggregators have the potential to optimize token pricing, waste and transaction fees, thereby providing users with better valuations. For example, trading contracts split between multiple DEXs can allow users to obtain better pricing than trading on a single exchange.
DEX aggregator integration is generally beneficial to DEX because they can attract more users and numbers. According to recent research, high-volume traders are increasingly using DEX aggregators, while retail users continue to use DEX directly.
DeFi boom and DEX aggregator
Due to the continuous development of DEX, DEX aggregator is a relatively new idea. However, in the recent DeFi boom, they have become more and more important to consumers. This is because more and more people put decent trade transactions first.
Understanding Pathfinder
DEX aggregator 1inch has just released the second version of its protocol. The new version includes Pathfinder, which is an API with new enlightenment and navigation technology. Pathfinder can aggregate the transactions of the 21 liquidity protocols it supports and use multiple market depths within precise mechanisms when necessary.
Why use “market depth”?
The number of open buy and sell orders is used to calculate market depth and measure the supply and demand of liquid assets such as cryptocurrencies.
This more complex strategy brings measurable benefits to users. For example, due to the enhanced quotation, the 1 sBTC-sUSD exchange rate provided by 1inch is 98% higher than Uniswap.
The use of “market depth” is a major optimization over the previous version of the agreement. The new algorithm uses a more sophisticated approach, rather than just aggregating exchanges between multiple protocols. It also includes different “market depths” that act as a bridge between source tokens and destination tokens.
Partial and dynamic fill tool
Pathfinder’s partial and dynamic filling mechanism is 1inch’s strategy to minimize the frequency of unsuccessful transactions.
When the customer appears to be trading on 1 inch, the aggregation of the transactions takes place between different agreements. Aggregation provides the user with the rate initially displayed in the UI. However, before the transaction is completed, the rate of one of the agreements may change, thereby reducing the attractiveness to customers. This is where the term “partially filled” comes into play. This function can partially fill the order, and can easily terminate the channel or several other routes for which the rate is changed.
Partial fill is set as default in Pathfinder. However, it can be turned off in the “Advanced Settings” menu. It is recommended to use this option to protect users from price slippage and unsuccessful transactions, especially for large transaction volumes. As a result, consumers successfully avoided failed transactions, and their unexchanged coins simply returned to their wallets. However, in this case, consumers only need to pay the exchange fee. In addition, consumers can save extra money by consuming Chi gas tokens. Chi gas tokens can reduce gas expenditure by 43%.
Similarly, dynamic fill options can help prevent unsuccessful transactions by switching parts to different protocols in splits or paths.
For example, consider an algorithm for exchange between aggregation protocols Uniswap, Sushiswap and balancer. If the Uniswap exchange fails, the entire exchange will be transferred to Sushiswap and Balancer. However, the exchange will still take place, providing users with the exchange rate they saw earlier and accepted in the interface.
flexibility
The idea behind PathFinder’s development is to provide a highly flexible algorithm that can adapt to various protocols. Curve, Chai, Balancer, Uniswap V1, Uniswap V2, Sushiswap, Kyber, Mooniswap, Oasis, Compound, Year, Bancor and Aave currently support 1inch, thanks to Pathfinder.
In addition, Pathfinder is built in such a way that it can handle blockchains other than Ethereum. In addition, there are plans to increase support for Binance Smart Chain, which is a parallel Binance Chain.
At the same time, Pathfinder can be upgraded to allow collaboration with centralized exchanges. Therefore, the start-up company will have new business potential built on the 1-inch agreement. For example, they might develop products that act as a bridge between CEX and DEX.
Mortgage token
The ability to deploy mortgage tokens as part of the exchange path from the lending agreement Aave and Compound is another important feature of Pathfinder.
Other tokens are bundled into mortgage tokens by Aave and Compound, such as Compound’s USD-linked token cUSD. Consumers use loan agreements that generate tokens to package or unzip them into mortgage tokens. The reason is that the collateral currency cannot be used in the trading network of the 1inch platform.
Pathfinder can now relocate, pack, or unpack a user’s mortgage tokens in one transaction, saving time and money. In addition, since packaging and unpacking are automated, users can quickly trade mortgage tokens from the reserve.
Lowest gas and maximum return options
Finally, Pathfinder provides users with the option to choose between “Maximum Benefit” and “Minimum Gas” functions. The maximum return feature allows the switch to take a complicated route to obtain the best value for users. On the other hand, in the lowest gas option, swaps are carried out at market exchange rates and will not be split among multiple exchanges. However, the customer pays the lowest feasible gas fee.
The evolution of DEX
The first decentralized exchange surfaced in 2014, but as blockchain-based decentralized financial services gained attention, it became popular. Even AMM technology helps alleviate the liquidity problems encountered by DEX.
Since there is no central authority to certify the information shared with centralized platforms, it is difficult for these platforms to perform KYC and anti-money laundering checks. However, regulators may still try to control the decentralized system. Custody regulations do not apply to these services, because those services that allow users to deposit still require a blockchain message signed by the user to transfer funds from the platform.
Users can now borrow funds to use their positions or provide liquidity to charge decentralized exchange transaction fees. More use cases may be generated in the future because these platforms are based on autonomous smart contracts. Flash loans, which are loans obtained and repaid in one transaction, are the best example of decentralized financial innovation.
in conclusion
If you plan to upgrade or build your DEX platform, you can find a suitable solution platform and seek professional guidance.However, if you want to have basic knowledge or become an expert, you can Learn DeFi. You can search for various cryptocurrencies to learn or Blockchain authentication Training courses. In addition, some organizations are offering DeFi training and DeFi certification courses.
In addition, you can also search for companies that provide services such as Web application development, encryption exchange development, NFT development, DEX development, or DeFi solution development. Choose the one that provides the best and economical solution.
[ad_2]
Source link
