Original author: 0x Fat
When cross-chain narrative first became popular, the industry generally believed that this track was most suitable for exchanges, because exchanges have rich experience on the asset side and can closely grasp user needs. But it is a pity that no exchanges really started doing it at that time, because from a profit perspective, this kind of business with heavy investment and low returns was not cost-effective.
However, with the improvement of mainstream public chain infrastructure such as Ethereum and Bitcoin, decentralized applications continue to grow in the multi-chain ecosystem, investors’ real needs for cross-chain transactions gradually emerge, and the time has come for developers to invest in construction. .
As an important infrastructure of the OKX Web3 ecosystem, OKX DEX is composed of the aggregator SWAP + the cross-chain bridge Bridge. According to official disclosures, OKX DEX has experienced rapid growth in user and transaction data this year, with daily trading users exceeding 10,000, daily trading volume exceeding 20,000, and daily trading volume approaching US$20 million.
This article will take the current development status of the cross-chain trading track as an entry point to deeply explore how OKX DEX achieves such results, and what their product development path is like.
1. Talk about the current status of the track: Improving transaction efficiency is a development consensus
1. As far as you know, what is the current status of the cross-chain aggregator track?
OKX DEX ：The early DEX mainly focused on on-chain asset transactions, and the flourishing decentralized protocols gave birth to transaction aggregators. As the number of public chains increases, so do the types of assets, which intensifies the fragmentation of asset liquidity on the chain. Therefore, in order to integrate the liquidity of various long-tail assets on the chain, it has become very important to improve transaction efficiency. Cross-chain aggregators exist to solve this problem.
At present, cross-chain aggregators mainly consist of cross-chain bridges and SWAP. Since the development process of this type of product is complicated and costly, there are not many teams working on this product. Among them, Bungee and Li.fi mainly focus on the development of cross-chain bridges. They have a relatively large number of connected bridges and a large number of users. 1inch and matcha mainly develop transaction aggregators SWAP, and their price inquiry algorithms are relatively stable. Each has his own strengths. OKX DEX is the only product on the market that takes care of both.
As OKX DEX, we have a self-developed inquiry algorithm system that can aggregate multiple liquidity protocols to provide users with optimal paths and quotes. In terms of cross-chain bridges, our on-chain speed is very fast, the number of access bridges and chains is relatively large, and we support almost all currency cross-chains and custom cross-chain bridges. At the same time, we will follow up on hot market chains as soon as possible to provide convenience for users to play in various ecosystems. Of course, we have also built a backend service team that can directly receive user feedback, maximizing the efficiency of resolving user feedback. In summary, the current cross-chain aggregator track is working hard to improve users’ transaction efficiency. Almost all research and development work is based on this, especially for our OKX DEX.
2. At this stage, the differences between various products are not obvious. As a relative newcomer, do you think there is a moat for cross-chain DEX?
OKX DEX ：As a decentralized product, DEX itself does not have a moat, but there is a moat in the field of cross-chain aggregators.
First of all, algorithmic capabilities are the core strength of aggregator DEX. Currently, all products on the market do not open source their own aggregate inquiry algorithms, only open source contracts. Our mission is to help users find the best paths and quotes among many DEXs, which is essentially a mathematical topic involving, for example, linear programming and knapsack strategies. At the same time, we also need to consider issues such as algorithm differences between different protocols, algorithm translation, and algorithm efficiency. From the perspective of quotation, the algorithm needs to consider issues such as prices and gas fees between different pools, so as to comprehensively find the optimal path for users. All in all, it is to find the optimal solution among a series of variables, which is a huge challenge for some Web3 start-up teams, so you can see that the number of aggregator products in the field is relatively small.
The second is the issue of algorithm implementation, which involves a very important infrastructure - the ability to parse data on the chain. In order to find the optimal path from many DEXs, we must first obtain accurate data on the chain and process this data quickly. The data on the chain is massive, and we not only have to deal with accuracy issues, but also speed issues. There is a team of hundreds of people behind OKX working on this aspect, so our infrastructure is very powerful. After obtaining this data, we can process and process the data to achieve functional development and make our algorithm meaningful. For users, they will find that our inquiry efficiency is very fast and accurate. It is precisely because of the strong on-chain data analysis capabilities that we can provide users with the most efficient, accurate and optimal quotations.
Finally, from the perspective of cross-chain bridges, we believe that the biggest moat is how to integrate many bridges with differences. These differences include differences in algorithm logic and technical implementation. The bridges on the market cover multiple types such as capital pool model and shadow asset model, and each type is subdivided into several different types. For example, the fund pool sub-mode includes 1:1 cross-chain and AMM cross-chain, and there are some subtle differences in the rate and calculation rules of each bridge. Therefore, some cross-chain bridge aggregators can only connect to APIs, and the inquiry efficiency is very slow. However, there are dozens of people in the algorithm team of OKX DEX. We have researched and connected the mainstream cross-chain bridges on the market, and built dozens of templates based on their characteristics. As long as bridges of the same type appear, we can automatically discover and connect them automatically. enter. There are currently more than 20 cross-chain bridges connected, including three-party bridges and official bridges.
In general, algorithm capabilities and cross-chain bridge access capabilities are important infrastructure needed to build a super cross-chain aggregator, and they are also the foundation for building a moat. If there are more, it is micro-innovation on top of these infrastructures. , such as intention transaction function, etc.
3. The concept of intention trading is very popular, but not many people can really explain its value. As developers, from your perspective, what conveniences can this function bring to users?
OKX DEX ：Intention trading is a product designed based on the users trading needs and intentions. In DEX under this design structure, users only need to express their intentions and then obtain the results, and the intermediate process is completed by the agreement. This concept sounds complicated. In fact, the logical essence is to attract market makers, scientists, and MEV arbitrageurs on the chain through a unique auction mechanism, and let them participate in the quotation competition, making the quotations better and balancing the makers, takers, and LP benefits the three parties and improves user experience.
The product experience of DEX intended for trading is closer to traditional Internet products. Users do not need to understand the complex trading algorithm logic on the chain. The product only serves the users final trading intention. Under this model design, it can reduce operating thresholds, reduce transaction costs, improve asset security, and strengthen interaction capabilities, which is conducive to increasing the large-scale adoption of Web3 and providing users with a smoother and more convenient transaction experience, and even personalized transactions. Scenes.
There are already many teams on the market doing this kind of thing, including the veteran DEX Uniswap launching UniswapX, the leading aggregator product 1inch launching fusion mode, and this year’s popular cowswap all adopt the logic of intention trading. Our OKX DEX team Next, we will work with UniswapX to develop the intention trading function.
2. Talking about product construction: strong analytical power and automation system are the keys to victory
4. As an important part of the OKX Web3 ecological layout, OKX DEX can be said to be an important achievement under the unification of all chains. How do you think we can create a super cross-chain aggregator that truly adapts to user needs?
OKX DEX：Our basic principle is to provide users with fast and safe products and services based on market hot spots, such as connecting all bridges that can be connected. Taking the Bitcoin ecosystem as an example, we have already connected to the SWFT cross-chain bridge and are currently connecting it. Enter ThorSwap cross-chain bridge. Next, we will pay attention to the trend of other popular narratives to connect more bridges, such as Wormhole, the cross-chain bridge of Solana Ecosystem.
On the other hand, we will continue to invest in capabilities such as algorithms and analysis. These invisible areas are the backing to meet user needs and protect the optimal transaction price and the safest asset interaction. The product design ideas of OKX all-in-one will also provide users with the most convenient, fast and unified trading experience.
5. Many investors say that cross-chain aggregators are the most expensive to build among the existing DEX categories. Why is OKX willing to spend a lot of money and manpower to invest in it?
OKX DEX：Swap and Bridge have always been very important infrastructure in the Web3 field, carrying the most basic transaction requirements of users. This is not a short-term track. Whether the Inscription track is popular, the DeFi track is popular, or NFT, gameFi, SocialFi, etc. become popular, there will be a large amount of transaction demand. In other words, asset trading, the Fi part This gives each Web3 track the core vitality to become popular. Then the most commonly used ones by users when trading are Bridge and Swap.
From Bridges perspective, users need to transfer assets between various chains in order to participate in these dazzling hot projects. From the perspective of Swap, multiple transaction opportunities may appear on the same chain at the same time, and users need to exchange assets in order to capture more opportunities. However, there is actually no Bridge and Swap product on the market that supports multiple chains at the same time, which increases the users participation threshold and interaction costs.
In order to provide users with a good product experience and save users from the trouble of jumping back and forth between different chains and different protocols, we decided to invest our energy in doing this, hoping to provide users with the most complete and most comprehensive products through practical actions. For good cross-chain aggregation trading services, we firmly believe that serving users is the first priority, which is also the original intention of our investment.
6. What is the path to building OKX DEX? What challenges were encountered during development?
OKX DEX：We are a cross-chain transaction aggregator launched in January 2022. By around December 2022, we have completed the construction of the first phase of the inquiry algorithm. We use the X-routing algorithm to automatically discover pools with relatively good liquidity on the chain and automatically connect them. In addition, the accuracy of the automated detection algorithm has been achieved, and the optimal quotation results can be given to users based on the gas fee situation. At the beginning of this year, the team began to develop an automated detection system on the chain. It developed an automated detection system from multiple dimensions such as protocol discovery, algorithm translation, transaction monitoring, and quotation comparison to protect OKX DEX user transactions.
The biggest challenge we faced when initially establishing OKX DEX was the self-developed quotation algorithm mentioned earlier, because there is no aggregator algorithm on the market that is open source, which requires us to develop a self-developed algorithm. And this set of algorithms has advantages over others, so there was a lot of research on algorithm selection at that time. The mainstream algorithms on the market include dichotomy, linear programming, knapsack strategy and other different algorithms. We took the strengths of each algorithm and established Developed a completely self-developed inquiry algorithm system.
Another challenge comes from the variety of protocol algorithms on the market. The protocol algorithm integrates different DEX quotation methods into its own quotation algorithm, and then we combine the quotations of different DEX algorithms for quotation calculation to find the optimal solution. This stage involves split comparison and routing comparison, and the prerequisite for achieving the optimal quotation is accurate translation of each protocol algorithm. We initially used manual methods to translate protocol algorithms, but later found that the biggest problem with manual translation is that it is possible It was error-prone and inefficient, so we later developed a complete automated system to automatically discover on-chain protocols, automated translation, automated access, automatic monitoring of algorithm accuracy, etc. This system exponentially improved our efficiency. At present, OKX DEX has integrated more than 400+ DEX and 20+ cross-chain bridges, and the annual transaction volume of the whole chain DEX has reached 1,000 M US dollars.
7. What is the strategic position of OKX DEX in the OKX Web3 ecosystem? Can you disclose your future development plans?
OKX DEX：DEX has always been laid out as an important infrastructure in the OKX Web3 ecosystem. Our goal is to make inter-chain transactions as simple as CEX and do our best to lower the user operation threshold. Everyone knows that OKXs values are to adhere to the concept of long-termism and always insist on driving its own development through innovation. Our achievements in the construction of the Bitcoin ecosystem are the best proof. At the same time, we also believe that opportunities are reserved for those who are prepared. The team is responsible for setting up the infrastructure, and it will naturally explode when the time comes.
Regarding future planning, briefly speaking, there will be three stages:
The first stage is to rely on the existing automated system and strong analytical capabilities of the entire chain to continue to improve transaction efficiency and lower the user threshold. We will continue to connect more chains and protocols, and continue to optimize algorithm logic and user experience to provide Web3 users with the best one-stop trading services.
The second stage is to seize the intention trading model, mechanically introduce market makers, scientists, and MEV arbitrageurs on the chain and let them participate in quotation competition, allowing those who are good at doing what they are good at, and improving the order efficiency of makers and takers. , explore the future trading form of DEX from the product perspective, and provide innovative functions for unique trading scenarios.
The third stage is to contribute accumulated technical experience to the industry, provide system construction services (Waas) to peers, and work together to build a prosperous on-chain ecosystem. We will package wallets, DEX and other infrastructure and upper-layer interfaces into SDK and API interfaces that are easy to use and program, and provide one-stop SDK and API access solutions, effectively lowering the technical threshold of the underlying blockchain and allowing developers to be more Efficiently focus on application layer innovation.
3. Talking about the evolution of the pattern: I hope to become the TOP 1 in the hearts of users
8. The current DEX track is very busy, homogenization is becoming more and more serious, and leaders like Uniswap are also seeking changes. How do you think the DEX landscape will evolve in the future?
OKX DEX：At present, 1inch has a relatively high market share, but in the future, as the infrastructure construction of the chain becomes more and more perfect, intention transactions will be paid more and more attention, because the intention transaction function realizes better and better quotations, no gas fees are required and the transaction success rate is High, even if the transaction fails, there is no need to pay gas. Next, OKX will make algorithmic quotes + intention trading quotes at the same time, hoping to provide users with the most advanced trading model and the smoothest trading experience at the same time.
From a larger perspective, the DEX industry will continue to innovate. We see novel protocols and unique algorithms emerging one after another, which is also a manifestation of the rapid growth of the industry. Back to the track itself, competition will become increasingly fierce in the future, but this is a good thing for users and very conducive to the birth of good products. It is also a good thing for the OKX DEX team. Partners can learn, grow and accumulate in the competition. experience and become stronger. We believe that as long as we continue to uphold the concept of user first, accumulate underlying technology, and continue to embrace industry innovations, we will eventually produce products that best meet user needs. OKX DEX is confident that it will become the TOP 1 product in the hearts of users.
