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Polkadot Ecosystem: Decentralized Exchanges (DEX)

In mid-2020, DeFi makes Ethereum’s scalability problem more urgent than ever, so scaling solutions and alternative ecosystems are also in the spotlight. Among them, Polkadot is emerging as one of the top choices for developers and users.

Of course, it is very difficult to write the entire Polkadot ecosystem because it grows both horizontally and in length, so in Polkadot Ecosystem I will share with everyone the 2 Sectors I think need to be most interested in DeFi on polkadot is Decentralized Exchanges and Lending & Borrowing.

Why focus on Decentralized Exchanges and Lending & Borrowing on Polkadot?

DeFi is Decentralized Finance or decentralized finance, simply put financial products and services on-chain, to do that needs a place to transfer value between parties in the ecosystem – DEX is such a place.
If Decentralized Exchanges is the first step to promote money flow on Onchain, Lending & Borrowing is the next step to help users spend more money they own (margin Trading, …).

Both of these areas are extremely developed on Ethereum and are the foundation for other DeFi Sectors to develop on it.

Of course, not all ecosystems develop in the same way as Ethereum, this depends on the openness (permissionless) of that ecosystem that they are oriented to develop separately.

At this point, Polkadot is the ecosystem that has the most similarities with Ethereum, a Network with a high degree of decentralization, frameworks to support building Protocols and Dapps in open source mode quite a lot. There is also financial support from Polkadot’s development fund. It is because of this that DeFi on Polkadot thrives both horizontally and in length.

Decentralized Exchanges on Polkadot

Decentralized Exchanges on Ethereum has two main types, AMM and Orderbook, due to some technical limitations of Ethereum and On-chain liquidity is still not too large, AMM is becoming the main DEX Model on Ethereum.

But with Polkadot, each Parachain is Customizable to serve a certain number of functions, so it allows the ability to combine Models, the problem of which Model is more widely used is still unfinished because the product is not Live. Here are some outstanding projects in the Decentralized Exchanges array in my own opinion.

Zenlink Dex Network

Zenlink Dex Network includes Zenlink DEX Module, Zenlink DEX Aggregator and other DEX Application on parachains.

By integrating the Zenlink DEX Module, Zenlink can enable parachains to quickly acquire DEX capabilities and share liquidity with other parachains, the ultimate destination being Zenlink DEX Aggregator, where users are just one click away. The mouse is able to access liquidity from Parachains and choose the best price of that trading pair (works similar to Dex Aggregators on Ethereum).

The AMM formula applied in Zenlink DEX is X*Y = K.

Zenlink DEX Network
Zenlink DEX Network

Polkaswap

Developers have two options when starting to build something on Polkadot:

Building on Substrate framework to be able to become Parachain from scratch on Polkadot.
Build Dapp, Protocol on Polkadot’s Parachain.
Polkaswap took the second approach, they built a Dex Aggregator on the Sora Network.

Polkaswap is a DEX AMM capable of establishing multiple sources of liquidity according to the liquidity pooling algorithm. When traders invoke the Swapping function, the liquidity pooling algorithm executes the order using the best offers from the liquidity sources.

Of course, since Polkaswap was not built as Parachain from the beginning, if they want to interact with other Blockchains, they will need to interact via the Bridge.

Polkaswitch

Similar to Polkaswap, Polkaswitch is a Decentralized Exchanges Aggregator built on Moonbeam, it was built with the goal of aggregating liquidity between Etherum and the Parachains on Polkadot.

Polkaswitch navigates multiple sources of liquidity per Token pair. Each liquidity source has its own algorithm and Polkaswitch will execute the Order using the best offers received from liquidity sources like Uniswap, Bancor, Sushiswap, Polkaswap, Kyber Network.

Similar to Polkaswap, it was not built as Parachain from the beginning, so if they want to interact with other Blockchains, they will need to interact via Bridge.

Polkadex

Polkadex is a Decentralized Exchanges that combines 2 outstanding features of orderbook and AMM (AMMs inside a DEX Orderbook), this same concept is presented by Raydium of Solana ecosystem.

At the core of Polkadex is FSP (Fluid Switch Protocol), an order matching protocol that switches between AMM and Orderbook, which ensures continuous smooth liquidity. The uniquely programmed AMM algorithm ensures that Orderbook liquidity is pre-matched, thus avoiding large slippage and impermanent loss, a common problem in AMM-based DEXs.

Polkadex is built based on Substrate framework to be able to become Parachain from scratch on Polkadot, its Blockchain is also customized to suit additional features such as: combined with fast execution logic, triple block time seconds, custom trading bot support and other unique feature…

Manta Network – Private Swap

Manta Network is a set of zk-SNARK application protocols to provide end-to-end anonymity, built on top of Polkadot’s Substrate Framework.

Manta Network includes a suite of products:

  • Payment protocol.
  • Decentralized exchange protocol.
  • Lending protocol (future).
  • Synthetic asset protocol (future).

Simple to imagine, Manta will solve the Private Swap problem by Tokenizing the anonymous assets (Private Tokens) pegged to real assets at a ratio of 1:1.

Manta Network – Private Swap
Manta Network – Private Swap

Then Private Tokens can work in Defi, users can Swapping Private Tokens through DEXs of Manta Network, further applying them in Payment, Lending, Synthetic Assets.

Also with the feature of Parachain Polkadot, Manta Network can interact with Chain and other Parachains. This is a big ambitious project on Polkadot.

Hydradx – Dynamic Swap

Hydradx’s DEX model is similar to Thorchain in that it uses the HDX project’s Native Token as a reserve and measure of value for assets listed on the Hydradx Decentralized Exchanges.
By becoming Polkadot parachain, Hydradx can expose more Parachains easily. In addition, Others Chain like Ethereum can also expose and transfer value with Hydradx through Bridge.

Hydradx – Dynamic Swap
Hydradx – Dynamic Swap

Like Manta Network, Hydradx is more of a collection of products than a single product. Its next products will involve Lending and Derivatives.

Summary

Decentralized Exchanges (DEX) is one of the platforms of DeFi. Without it, on-chain value cannot be moved. I hope that through this article, you will have a clearer view of Decentralized Exchanges on Polkadot.