Next Gen DEX

batangcrypto (40)in #blog • 4 years ago (edited)

^{_{Source: Publish0x}}

_{“We are losing decentralization”}

With the advancing Blockchain technology, Decentralized Exchanges are getting left behind. Trusted Centralized Exchanges which is great governing bodies, has higher liquidity and provide seamless user experience. Too good to be true but the fact that we are losing grasp of the life long dream, we are losing decentralization.

With many years of cryptocurrency experience, I reminisce the bitter sweet memories brought by early trading experience. From the day of receiving my first airdrop coin, I felt delight, traded immediately and my first trade to happen at Etherdelta. The coin is not yet listed, but enabling users to import the smart contract to put a buy/sell order was a relief for holders way back then.

As I progress, being able to trade without having to register information, trade with such limitations or deal with unnecessary regulations, all was not a problem because of Decentralized Exchanges.

Times pass and flaws are discovered. Network is clogged not allowing low gas orders to go through, higher fees are taken, and because it is decentralized, all loses for faulty trades are never got to be addressed and loses are never compensated.

Today, we cannot see a reliable DEX anymore which could hopefully bring a delightful user experience to anyone who has keen interest to experience the power of decentralization, the promised freedom of the blockchain technology.

In this content, I am gonna introduce to you to the future of Decentalized Exchange in the name of Injective Protocol which is one of the scholars of Binance Labs, an infrastructure by Binance to incubate, invest and empower up and coming blockchain products and #BUIDL a great ecosystem out of it.

Introducing Injective Protocol

Injective is the first front-running resistant, layer-2 exchange protocol that unlocks the full potential of borderless finance by supporting margin trading, derivatives, and futures.

Injective Protocol is the future of Decentralized Exchanges because of the Layer-2 Architecture that enables them to scale and at the same time maintain the security from the Ethereum Network which is not given by default of those centralized Exchanges.

What’s good about this is that we could possibly use a decentralized exchange again. Made possibly by Injective Protocol, problems like trade collisions, liquidity problems, frontrunning and the likes.

Binance Labs Experience

^{_{Source: Binance Labs YT}}

With Binance Labs Incubation Program, founders Eric Chen and Albert Chon undergo a 10 week on-site program for early stage support, investment and partnership introduction from the Binance Network. This gives Injective Protocol all the necessary resources to succeed from their ambitious project which is is to give birth to the most advanced and scalable DEX ever made.

I also want to highlight the same technology that is used by the Binance DEX, the Cosmos SDK for a clean, well-structured code that enables them to build a flawless codebase. Even with Binance DEX as competition, Binance still proceed to support Injective Protocol which is quite confusing for me but props to Binance still for sharing the competency for the best DEX.

DEX Problems

Limited Usability
Decentralized Exchanges usually comes with limited usage and that is only to trade or store your coins. What is worse is the centralized design and governing bodies. Take IDEX as an example, they’re a centralized exchange but how can they implement KYC? How was that possible? It’s a confusing scenario where dubious mistakes are taken.

This kind of flaws from older DEX’s is the reason why users didn’t want to use or trust DEX again.

Centralized Designs
Like I mentioned, Centralized Design with Limited Usage is really awful to see on DEX. DEX is meant to be used as a P2P platform and there must but no control other than the user itself. Even worse, the withdrawal limitations after KYC verification is tighter than Centralized Exchanges.

There are also focal points that is exposed in this type of exchanges like private key phishing scam and the likes. Unreliable are those decentralized exchanges but with centralized design.

Trade Collision
This happens when there are plenty of takers in one order at the same time, vice-versa. There is a congestion or delay in the process of blocks for the specific order because of the slow block mining that happens every 15 seconds.

This is caused by a slow network and cannot be address with out Layer-2 sidechains.

FrontRunning
With Trade Collision, there are hanging orders in the chain that could be a chance for profiteering. For example, I see some hanging buy orders @0.1c in the chain, what I will do is market buy all @0.09c available by increasing my gas fee since Ethereum process transactions at gas-time priority basis.

With slow transactions, there are lapses that could be in the sake of other users for profiteering which is not fair and eligible for true decentralization.

Liquidity
Slow transactions, Centralized Designs and features, Trade Collision, Low-Maintenance and credibility exchange. All of that is the cause of low liquidity. For those who aren’t aware, liquidity is the volume of money in that particular exchange (from active takers and makers).

Who would trust and exchange with detrimental issues which could harm their investments and money. Trust in Decentralized Exchanges are taken away because of these listed mistakes and many more, that is also why it ain’t the go-to-market anymore.

Injective Protocol Solution

Injective Chain

It’s a Layer 2 (Sidechain Implementation) and Cosmos Zone SDK that is also used by Binance Chain. Addressing the problems on clogged network and other possible delays, Injective Chain aims to provide a “sidechain” solution on top of Ethereum Network that could provide higher transactions per second. And with the help of Cosmos SDK to enable TEC (Trade Execution Coordinator) to eliminate front-running orders and enables interoperability that makes the chain interact with another chain like EOS, etc. as well as other viable customizations SDK can provide.

This feature I think is the backbone of all the feature Injective Protocol that will provide and could provide in the future iterations and developments.

Sidechain is another term usually used for Layer 2. Cosmos SDK is a framework for building blockchain applications more easily that comes with other perks as well.

Injective Futures and Exchange

As far as I know they would be the first DEX to implement futures trading on Derivatives Market. They could also interact with other chains so we could see integrations of trading crypto, not only for Ethereum Network but with other coins as well.

As a matter of fact, they could act like or look like a well designed centralized exchange but on a decentralized manner. Got the security on ramp but with the best interface and features to offer in a crypto-derivative market. With those following features, liquidity could come their way so let us see about that when they go live.

You can sign up for the tesnet waitlist on there homepage here: https://injectiveprotocol.com/

INJ Token Tokenomics

Looking up on their Announcement Thread of Bitcointalk (here), they also has a local currency to provide additional liquidity as well as utility that we could all take benefit from.

As stated, their token could be

PoS Reward — These is an incentive for staking your “x” amount of coins to “x” amount of time that gives you “x” amount of rewards.
Tx Fee Discount — It’s like premium membership but without paying but for just holding coins in your wallet.
Node — Operating a node. Staking a “huge” amount of coin and help the network secure.
Protocol for Voting and Governance — For future changes to be done without any governing body. All decisions would be made by the community.

Again there is no official NEWS about “Official” Token Release and there is no indicated information in their whitepaper regarding so.

CONCLUSION

It’s great to see another good DEX to operate with real and viable solutions to existing problems, I think that is what we lost when dealing with too much regulations. DEX are supposed to be free of any burden and with Injective Protocol leading the way and solving the existential problems DEX’s are facing, we can see a new wave of DEX’s that can “actually” dominate the crypto market.