1. Re-understand DEX (decentralized exchange)
2. DEX on Ethereum
3. DEX on HECO and BSC
Key Take Away:
DeFi is a field where wealth and risk coexist. It has been commented on the Internet that the DeFi field is a world composed of a group of scientific bourgeois players. DEX can be said to be the first step of DeFi. More than 90% of users started to know DeFi from DEX, so the "Prophet" hereby hopes that everyone must become more proficient in DEX before playing other projects.
In the first lesson of DeFi science popularization, "Prophet" introduced to youThe cornerstone of the DeFi world - lending. In fact, when lending first appeared, we didn’t know how far DeFi could develop. After all, the extremely unfriendly user experience and high gas fees on the chain were enough to keep users out. DeFi can get to where it is today. In addition to the traffic and asset explosion brought about by Compound’s launch of liquidity mining, what’s more important is that DeFi has built a platform on the basis of lending, including lending, DEX, derivatives exchanges, A complete financial building with multiple products such as smart pool, stable currency, insurance, etc.
The blockchain world is different from the traditional financial world. The financial system of the traditional financial world is controlled by various institutions. The communication efficiency between institutions is extremely low. For example, your deposit information and your insurance information are likely to be inconsistent, which makes it very difficult for you to buy a security insurance for your assets very simply. , Similarly, you can't buy all the bank's wealth management products with only one bank account, let alone trade stocks and futures. But it is different in the blockchain world. All DeFi application codes are open source, and the essence of on-chain applications is the interaction of various smart contracts. Therefore, if any DeFi application wants to interact with other applications, then You only need to browse other people's code to make sure there are no problems, and then you can interact very easily. This interaction is actually a transaction process. Therefore, in the blockchain world, various financial protocols can be integrated at a very low cost, and then can quickly respond to and satisfy user needs. Everyone has also given a very vivid name to DeFi—— DeFi Lego. But the financial world is not a building block after all. If the building blocks fall down, you can start again. The more connections between various agreements in the financial world, the higher the accumulated risk. Once there is a problem in one link, it may cause a landslide-like collapse. The subprime debt crisis in the United States in 2008 was essentially caused by the superposition of such junk asset financial agreements.
There is no doubt about the wealth effect in the DeFi world. From July to October last year, a lot of users have gained a lot of wealth in Ethereum’s DeFi products. At the same time, the tokens of several top DeFi projects have also increased dozens of times. The token of aave has risen nearly a thousand times from the lowest point. As users of the blockchain world, we have no reason not to pay attention to DeFi, but if we do not have a deeper understanding of DeFi, we may also be caught by the risk of the DeFi world. Injured to the point of nowhere. Therefore, the next series will start from various tracks in the DeFi world, try our best to sort out the whole picture for you, and help you better understand the benefits and risks of the project. Today, I will sort out the track of DEX for you.
DEX (Decentralized Exchange), as the name implies, is a type of exchange whose trading process is completely decentralized, which is different from centralized exchanges. It is divided into three categories from the trading mechanism:
The first is AMM, or Automated Market Maker Exchange. This kind of exchange usually has a pricing formula. For example, uniswap and sushiswap both use a fixed product formula, that is, K=X*Y, and keep the K value unchanged before and after a transaction. For example, user A builds a liquidity pool with 10 ETH and 10,000 USDT in it, then X=10, Y=10,000, K=100,000, and the price of each ETH is 1,000 USDT. When user B wants to exchange 1,000 USDT When buying ETH at the price, Y=11000USDT at this time, since the K value remains unchanged before and after a transaction, then X=100000/11000=9.09 at this time, then the ETH bought by user B=10-9.09=0.91, user B Obviously I wanted to buy 1 ETH at the price of 1000USDT, but in the end I only bought 0.91. The difference (0.09) is the slippage mentioned in the AMM mechanism DEX. The greater the slippage, the less cost-effective the transaction;
The second is PMM, that is, an active market maker exchange, such as DODO (the algorithm of this type of DEX is more complicated, and I will introduce it to you later if I have the opportunity, here I will only introduce its basic features), its main advantage is to reduce AMM The slippage problem caused by the mechanism also supports the provision of unilateral liquidity, so DODO has attracted a lot of attention as soon as it went online;
The last one is the order book mode exchange, this type of exchange currently does not have a particularly good user experience. It can also be divided into two categories in terms of transaction process: the first is direct transactions, such as uniswap and sushiswap; the second is aggregated exchanges, such as 1inch. After a user initiates a transaction, the smart contract will automatically aggregate all quotes on the chain, for The user selects an offer with the least slippage.
At present, the 24-hour transaction volume of DEX on Ethereum is maintained at about 2 billion US dollars, and reached 4.5 billion US dollars at the peak. This volume is already very close to some large centralized exchanges, so DEX has also become a centralized exchange. A track of great concern.
According to Debank’s data, the DEX with the highest proportion on Ethereum is Uniswap, which basically occupies half of the country. If you remove the stablecoin exchange and some derivatives exchanges, then basically Uniswap must be the absolute DEX in DEX. Leader of a group. At that time, Uniswap airdropped 400 tokens to users, and it became a good talk in the currency circle. Calculated according to the current price of UNI of 30U, this is an income of 12,000U.
The trading page of Uniswap is different from the trading page of centralized exchanges. It allows users to directly select trading pairs for trading. For example, as shown in the figure below, we have selected trading pairs of ETH and USDT;
When the user needs to change the trading currency, he needs to click on the location of the currency and choose independently, but it should be noted that since uniswap is a decentralized exchange, anyone can open a trading pair on it, so In the early days, there were a lot of altcoins and clone coins cheating on uniswap, and a lot of users suffered losses as a result.
If we want to avoid being cheated, we usually have the following methods to avoid (here, "Prophet" defaults that users are already familiar with the operation process of the wallet, and users who are not familiar with it can directly Google):
1. Directly at Coingecko
(https://www.coingecko.com/en)
or Coinmarketcap
(https://coinmarketcap.com/) to search for the token name, then find its contract address, and then enter the contract address in the place where uniswap selects the token. The red box in the figure below is the contract address of the token:
2. Through Ethereumscan (https://etherscan.io/) to search for the contract address of the token. This method usually requires that the user and the token have already had a contract interaction, find the transaction in their wallet, and then open it on Ethereumscan to search for the contract address;
3. Open the Charts option of uniswap, then search for the trading pair you want to trade, and look at the total pool and 24-hour trading volume of this trading pair. Usually, the one with a relatively large amount will be genuine, and this method can only assist in judgment;
4. The last way is to find a friend who is familiar with DEX transactions and ask him to help you find the contract address of a certain currency.
Transactions in DEX still require a certain amount of knowledge on the chain, so the "Prophet" here suggests that if you are a novice player, try to try with a small amount of money first. It may not be cost-effective after including the gas fee, but At least it will not cause large capital losses due to your own misoperation. It is particularly worth noting that because DeFi is decentralized, any losses need to be borne by users themselves, and no organization will be responsible for your losses.
Sushiswap is an imitation of Uniswap. There was an accident that the founding team abandoned the project, and it was later taken over by SBF. Sushiswap currently ranks second among DEXs, comparable to 1INCH, which does aggregate transactions. Sushiswap’s ability to grow from an imitation project to the second-ranked exchange on Ethereum is related to its continuous development of liquidity mining. We will give you a very detailed strategy for liquidity mining in subsequent articles comb.
The core function of 1inch is an aggregator. When a user initiates a transaction, it will search for the most reasonable quotation on the entire network to reduce the user's cost. The figure below shows the quotation difference between the three platforms for the COMBO/DAI transaction.
Basically, the experience of using DEX is very similar. As long as users can use Uniswap proficiently, it can be said that all DEXs can be used very easily.
The DEX with the largest trading volume on HECO is MDEX (https://ht.mdex.com/#/swap), in addition to trading functions, MDEX has also opened transaction mining and liquid mining. Currently, MDEX has a daily trading volume of about 4 billion US dollars and a TVL of about 2 billion US dollars . The reason why MDEX was able to achieve such a large transaction volume in a short period of time is that DeFi projects on HECO started liquidity mining one after another, which stimulated the demand for token exchange.
The DEX with the largest trading volume on BSC is Pancakeswap (https://pancakeswap.finance/). Pancakeswap also integrates NFT and IFO transactions. Now its trading volume has exceeded 2 billion US dollars, and Binance Changpeng Zhao also called Uniswap , let it migrate to the BSC.
It is worth noting that due to the high gas fee of Ethereum and the enrichment effect of DeFi projects on HECO and BSC, many users have migrated to HECO and BSC for transactions. However, since many projects are not audited, the risks are relatively high, and users still need to pay more attention to risks.
DEX can be said to be the first step of DeFi. More than 90% of users start to know DeFi from DEX, so the Prophet hopes that everyone must become more proficient in DEX before playing other projects.
This article does not constitute any investment advice.
statement:
This article does not constitute any investment advice.
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