Original from Newdex Influencer — Ruslan:
DeFi services are becoming increasingly popular among crypto enthusiasts. One of the fastest growing areas among DeFi services is decentralized exchanges (DEX), the popularity of which has increased significantly with the development of decentralized finance.
Table of contents
- The DEX liquidity problem;
- Comparing of DEX aggregators;
- Experience using of the Newdex BSC platform;
- Experience using of the 1inch platform;
- Development prospects of DEX aggregators.
The DEX liquidity problem
Until recently, one of the significant problems of trading on DEX was low liquidity. So, according to a study of a popular analytical cryptocurrency service cryptocompare.com more than 30% of respondents believe that low liquidity is one of the main reasons why users prefer to trade on CEX.
The problem of low liquidity can lead to slippage of orders with sharp price movements and high commissions for transactions. As a rule, the less popular a trading pair is, the smaller the trading volumes, and the higher the probability of price slippage when making an order.
The problem of low liquidity was one of the main reasons for the slow migration of users from centralized exchanges (CEX) to DEX. At the same time, due to low liquidity, the prices of tokens on DEX and CEX can differ significantly, which makes trading on DEX not attractive for many traders. In addition, trading large volumes becomes difficult, or even impossible on DEX with low liquidity, which is why sharp price fluctuations are possible.
The high liquidity of the largest CEX makes trading much faster and safer because users have the opportunity to trade at predictable prices. This makes trading on CEX more preferable.
The problem of low liquidity was solved with the advent of decentralized aggregators of exchanges that allow users to trade on several platforms simultaneously using one account. Decentralized aggregators are aimed at solving problems with low liquidity, ease of trading, and high commissions.
Decentralized aggregators allow users to make transactions at the best prices, redirecting customer transactions between supported platforms using liquidity protocols.
One of the key features of DEX aggregators is the use of liquidity pools. Most regular DEX uses an order book system similar to the one used on CEX. But most DEX aggregators use an automated market maker (AMM).
Instead of the traditional order book system, AMM provides liquidity through liquidity pools with the help of its smart contracts. Within the framework of liquidity pools, an instant exchange is carried out based on the exchange rate formed by supply and demand.
Platforms such as Uniswap, SushiSwap, PancakeSwap, and others are sources of liquidity. The prices of digital assets in the liquidity pools are calculated using a pricing algorithm, the formula of which depends on the platform.
Liquidity pools operate as decentralized protocols, without a single central management organization controlling the system, and allow any user to participate and provide liquidity to other participants of the system.
DEX aggregators allow you to make trading faster and with lower commissions with the help of liquidity that is stored in liquidity pools, allowing you to exchange tokens at any time.
Comparing of DEX aggregators
One of the most popular aggregated DEX that uses liquidity pools is the 1inch platform. 1inch is a decentralized exchange aggregator created to combine all major DEX into a single system.
The 1inch platform allows users to perform aggregated trading on three independent networks at once, supporting access to more than 50 sources of liquidity on the Ethereum platform, 20 on the Binance Smart Chain, and 8 on Polygon.
One of the sources of BSC liquidity is Binance Liquid Swap, which uses the AMM algorithm, instead of order books.
Binance Liquid Swap supports two types of pools:
- Stable. This type offers a system with a permanent hybrid AMM function that performs transactions and pricing between two stablecoins (BUSD, USDT, BKRW, DAI, and others) with low slippage.
- Innovative. The basis of the innovative Liquid Swap pools is the use of the AMM system with a constant average value, which performs transactions and pricing for two digital tokens or two fiat currencies, or a combination of them.
Until recently, the 1inch platform was the only DEX aggregator that supports BSC and BSC liquidity sources.
At the same time, the 1inch aggregator uses the aggregated trading depth model, and Newdex BSC uses an updated model, expanding the market list of tokens available for trading (such as the $ BNB and $ BUSD trading sections), providing the same trading tools that are available to users on CEX.
It should be noted that on January 19, 2021, the Newdex platform was updated and switched from a decentralized exchange based on order books to a model of a decentralized exchange aggregator.
The launch of the Newdex platform on BSC is only the first step towards creating an aggregated multi-chain DEX that will support liquidity on Ethereum platforms (including Layer 2), HECO, liquidity pools of the main swap services on the EOS network (Defibox, Defis Network, and others), including BSC, to provide users with better liquidity and reliable information about tokens.
The Newdex team implements many useful functions such as K-line, Price market, and others to become a single tool for decentralized multi-chain trading, providing its users with the best liquidity in the market.
Platform usage experience
Supported tools and wallets
The Newdex BSC platform supports the following sources of liquidity:
PancakeSwap, MDEx, BakerySwap, ApeSwap, Defibox, SushiSwap, and Biswap.
Supported wallets for connecting to the platform:
TokenPocket, MathWallet, Start, Bitpie, imToken, BitKeep, ONTO Wallet, and Coinhub.
To connect to trading on Newdex BSC, you can use the following browser plugins: Metamask, WalletConnect, and Binance Chain Wallet.
The connection to the platform is automatic, the user only needs to register in one of the supported wallets. After the user has logged in to their wallet in the browser, the Newdex BSC platform automatically connects to the user’s wallet, while users do not need to transfer their funds to the exchange and transfer access to private keys. All funds available on the wallet are available for trading on Newdex BSC.
Trading platform Interface
Already, almost 1,700 tokens are available on the platform for trading on the Binance Smart Chain.
There are 4 tabs at the bottom of the page:
Home — the home page, which contains a list of tokens available for trading, is divided into tabs for quick navigation and searching for the desired category of trades.
Markets — is a trading tab where you can select the base currency to which the quoted tokens are traded. The base currencies BNB, BUSD, USDS are available for selection in the BSC network. In addition, the Favorite categories for the most frequently used trading pairs and Hot, which contains a list of currency pairs with the largest trading volume on the platform, are available in the Markets tab. There is also a GameFi tab containing a list of game segment tokens on the blockchain based on decentralized finance.
Swap — allows you to make a quick exchange at the current market price.
My — contains information about the user’s assets.
When you click on a trading pair, a trading page opens on any tab, where you can buy or sell a price asset. In addition, the page has a set of tools that allows you to get detailed information about the trading volume, a list of recent transactions.
On this page, you can get detailed information about any token available for trading on the Newdex BSC platform by clicking on the Basic info tab.
This tab contains a detailed description of all the tokens available for trading on the platform, as well as all the necessary trading information about the tokens, including the total issue, current issue, market capitalization, as well as a general description and purpose of the token.
All information about tokens is taken from official sources and is completely reliable.
The amount of transaction fees on the Newdex BSC platform is only 0.06% of the transaction amount.
By clicking on the “Settings” button, users can flexibly configure trading, including the choice of liquidity sources and the function of the level of permissible slippage at the time of the transaction — “Transaction protection”, which value can be set manually from 0 to 50%.
The ability to fine-tune, select sources of liquidity, set the value of “Transaction protection” is a unique characteristic of the Newdex BSC platform and allows users to provide the best trading experience on the DEX aggregator market.
To perform a quick exchange on the Newdex BSC platform you can use the Swap tab, where you can select the tokens available for exchange from the list.
For a faster and more convenient search for the necessary quotation, you can use the Markets tab. The user will be automatically redirected to the Swap page when making an exchange.
In the exchange window, you need to set the desired transaction volume, and then click the exchange button. Then a transaction confirmation window will open in the user’s wallet connected to the exchange.
The transaction takes only a few seconds to complete. The assets acquired as a result of the transaction are immediately available in the user’s wallet. The list of transactions carried out on the platform can be seen by clicking on the Records button in the trading tab.
For a more flexible configuration of the transaction, the Max return and Lowest gas options are available on the platform, which allows the user to choose between the exchange rate or the lowest commission per transaction.
An important advantage of Newdex BSC over its competitors is the ability to monitor transactions of the entire BSC network in real-time. While making a transaction on regular DEX, users can only get the number of B tokens that they can get by selling a certain number of A tokens. On Newdex BSC, users can access the full tape of A/B quotes for the last 4 and 24 hours.
Trading platform Interface
The Newdex BSC and 1inch platforms have a different principle of connecting a wallet. The wallet is connected on the 1inch platform in manual mode. To do this, the user must select the plugin available from the list, and then confirm the connection to the aggregator in the pop-up wallet window. The Newdex BSC platform automatically recognizes the wallet plugin installed in the browser and connects to it, without requiring access to private keys. All the user’s funds remain in his wallet.
The trading section on the 1inch platform does not have tabs for faster navigation between token categories, impairing the user experience of finding the necessary token on the platform.
There is no section on the 1inch platform with detailed information about tokens, including the total issue, current issue, market capitalization, and general information. When opening the trading page with a new token, users have no idea what this token is and what it is used for, which also worsens the user experience of trading on the 1inch platform.
The transaction is executed in the 1inch aggregator in the same way as on the Newdex BSC platform. You can make transactions in both Simple and Classic modes. Like the Newdex BSC platform, the 1inch aggregator contains a set of tools for flexible configuration of transactions. The aggregator allows you to manually set the Gas Price, allowing you to choose a compromise between the transaction speed and the commission amount.
The 1inch platform has a similar Slippage tolerance function, which allows you to set the level of permissible slippage at the time of the transaction. It is possible to choose the sources of liquidity.
Development prospects of DEX aggregators
Decentralized aggregators are aimed at solving problems with low liquidity, ease of trading, and high commissions, allowing users to make transactions at the best prices, combining liquidity from different liquidity pools.
DEX aggregators rely on complex algorithms to take into account many factors when choosing the best liquidity provider for token exchange.
Among the most popular DEX aggregators, the 1inch and Newdex platforms should be highlighted. Both platforms offer a wide list of tokens available for trading, as well as the necessary set of tools and liquidity pools.
An important feature of both platforms is the support of a modern and flexible blockchain with high bandwidth — Binance Smart Сhain, which is rapidly gaining popularity, and more and more tokens are being launched on it. BSC is becoming the largest source of liquidity, along with the main Ethereum network.
The 1inch platform was launched in August 2020 and was the only DEX aggregator that supports VSC. But recently, the BSC network supports the Newdex aggregator, which has been on the DEX market since August 8, 2018, and has already managed to gain popularity among many supporters of DEX trading due to security, reliability, high liquidity, and user-friendliness.
The Newdex platform is developing rapidly. Since January 19, 2021, Newdex has been updated and has moved from a decentralized exchange based on the order book to a model of a decentralized exchange aggregator.
On August 8, 2021, Newdex launched a beta version of the platform for trading on the Binance Smart Chain (BSC-Beta). At the same time, the Newdex BSC platform has several advantages over competitors and has a significant potential for outperforming competitors.
The Newdex BSC platform offers users a convenient navigation system for faster token search, as well as an extended K-line mode, providing users with functionality similar to CEX. The transaction fee is only 0.06%, which is significantly lower than that of many competitors.
There is a section on the platform that provides all the necessary and detailed information about the tokens available for trading. In addition, unlike most DEX, Newdex BSC allows users to track the transaction feed of the entire network to understand how trades are taking place between buyers and sellers at the moment.
Newdex is developing an aggregated multichain DEX, which will support liquidity on Ethereum platforms (including Layer 2), HECO, liquidity pools of the main swap services in the EOS network (Defibox, Defis Network, and others), including BSC, to become a single tool for decentralized multichain trading, providing its users with the best liquidity on the market and unlimited trading!