Transactions are the absolute core of the Crypto world, but in the eyes of different practitioners, the channels for completing transactions are very different.
Centralized exchanges almost carry the trading liquidity of the entire industry. Under the centralized model, the platform has high matching efficiency, good trading depth and fast transaction speed.
But for the native world of public chains, decentralized exchanges based on smart contracts are the core of the entire on-chain transaction and the liquidity core of on-chain business. The token listing and trading rules of decentralized exchanges maintain the same permissionless trading characteristics as public chains, forming a clear threshold difference from centralized exchanges.
If we look at each public chain individually, there will be a core decentralized exchange to activate the business and ecology of the entire chain. We have even seen the full chain of token business built around DEX on Ethereum and Solana.
In this cycle, the TON public chain has become famous, but the ecological construction of TON is still in its early stages. The DEX applications on the TON public chain are generally few and single in function. Compared with the mature Ethereum and Solana, how do DEX applications on TON need to develop?
Mature DEX on Ethereum and Solana
There is no doubt that the most mature DEXs at present are Ethereum and Solana.
Ethereums DEX has benefited from the long-term development of Ethereum Defi, while Solanas DEX has benefited from the performance of the chain and the popularity of the ecosystem. Its DEX transaction volume once reached a level that was comparable to that of CEX.
Next, let’s look at the development of DEX on the two chains respectively.
The earliest DEX of Ethereum is Uniswap, which pioneered the AMM model, using a pool of tokens invested in equal proportions as the liquidity supply for two tokens in a trading pair. In the iteration of Uniswap applications, V1 is the simplest AMM version, V2 optimizes functions such as transaction matching and LP, and V3 adds the function of providing liquidity in a fixed price range, starting to provide friendly support for professional liquidity providers, which is also the currently running version. In addition, V4 with functions such as limit orders is also being implemented.
From the changes in iterative versions, Uniswap not only ensures smooth transactions for users, but also continuously upgrades and provides more mature asset management functions for LPs that provide liquidity. This represents the optimization direction of DEX.
In addition to swap and AMM LPs, Uniswap has also achieved good results in DEX business.
First of all, there is MEV. During the user transaction process, the price of the AMM pool changes at any time with the proportion of tokens in the pool. At this time, MEV will exist because of the arbitrage space generated during the AMM pool transaction matching process, and the token transaction price will also affect the price reading of other applications on the chain.
Therefore, Uniswap also has a natural advantage in MEV and Oracle.
On MEV, Uniswap maintains a certain degree of MEV resistance, guarding against sandwich attacks caused by MEV and higher transaction slippage in addition to impermanent losses.
On Oracle, DEX is almost the fastest price source for trading pairs and the most complete source of trading pair data, which makes many DeFi protocols choose DEX oracle direct quotation solutions based on Uniswap instead of Chainlink and other Ethereum off-chain oracle solutions. This allows DEX to use the oracle capability as one of the output capabilities to form other DeFi data modules (such as lending protocols and derivatives trading markets).
Uniswap represents DEX, but the refined functions required by DEX business are supplemented by other DEX. There are many types of DEX on Ethereum, such as Balancer, Curve, Sushiswap, which have been developed for many years, and aggregator DEX such as 1inch, MetaMaskswap, Matcha, etc.
Among them, the emergence of Balancer has begun to make DEX more refined as the liquidity center of on-chain applications. First, Balancer proposed the management of liquidity supply: liquidity pools with different weights and multiple tokens. It boldly changed Uniswaps equal-proportional liquidity pool to a custom ratio and multiple tokens, which is conducive to the projects liquidity supply and market value management. Furthermore, Balancer also changed the Launchpad rush purchase rules to the LBP rules that are more conducive to users obtaining reasonable token prices, changing the impact of AMM pool preemptive scientists on transaction prices;
The existence of Curve mainly presents us with a market for on-chain stablecoin transactions, which mainly provides transaction liquidity for various stablecoins and pTokens. Stablecoins and pTokens are actually transit objects in the DeFi transaction process and are essential for on-chain transactions and business implementation on the public chain. In the economic mechanism of tokens, some of them also play a buffering role.
Looking at DEXs such as Balancer, Curve, Sushiswap, and DODO, in addition to trading and exchange, another important business is to provide staking pools for LPs and pTokens and other tokens to complete the compounding of assets. These DEXs not only gather the LP liquidity of AMMs, but also play a role in the supply chain of applications such as Defi.
In summary, we can clearly see that on Ethereum, a mature chain has been developed based on DEX, but the transaction confirmation speed on Ethereum is slow. When the transaction confirmation is fast enough, or the data feedback on the chain is fast enough, the corresponding business may change to another form of development. For example, Solana.
The biggest difference between DEX on Solana and Ethereum is that the experience is almost the same as CEX, and if the transaction confirmation is fast enough, the role of DEX and aggregator is the same. At this time, DEX cares more about where are the trading pairs and corresponding LP pools instead of everything is on my platform.
Therefore, the support for LP will be more refined.
Since Uniswap V3 proposed LP with a fixed price range, all subsequent innovative DEXs have added price management based on LP.
On Solana, the most sophisticated DEX is Jupiter, and the one with the most sophisticated liquidity pool function settings is Meteora. Compared with the two, Meteoras main function is to provide liquidity for corresponding trading pairs. In addition to price ranges, the sophisticated settings it provides to LP also include token volatility curves, ratios, etc. In addition to the rich LP functions, Jupiter also focuses on token issuance and will be designed according to user needs. For example, users can use dollar cost averaging (DCA) to purchase tokens in batches multiple times.
In addition to DEX, almost all wallets on the Solana chain have the transaction aggregation function of on-chain transaction pairs. With extremely fast transaction confirmation speed, users no longer need to enter DEX to complete swap operations.
This reflects the design characteristics of DEX applications on high-speed blockchains: when designing functions, modular openings should be left, and functions can be combined in a plug-in manner, so that all users entrances can quickly integrate DEX trading modules, allowing users to use the liquidity on their own DEX when they need to swap.
Current Status of TON’s DEX
Ethereum and Solana’s DEXs are already so mature in the cycle, so what is the current situation of TON? How much is the difference, and where is the difference?
TONs performance and pressure-bearing capacity are the only ones among all current public chains that can stand shoulder to shoulder with Solana, but TONs ecosystem is a combination of the Web2 model and the Web3 model. This combination will technically dilute Web3 in use and deepen Web3 in technology.
This feature is very obvious in the DEX in the TON ecosystem.
For example, Telegram has a built-in centralized trading pool to complete the recharge of stablecoins and TON, and then complete the exchange of TON and other tokens. From a functional point of view, it is already a simplified version, and the operating experience is almost the same as the flash exchange of CEX.
This function is the first function of Telegrams Wallet. The second function is to interact with the chain through the TON public chain wallet TON Space. The experience is basically the same as using MetaMask on PC and mobile terminals. If you need to exchange tokens, STON and Dedust are more commonly used in the ecosystem, but the functions are basically similar to Uniswap V1.
Obviously, this reflects TONs shortcomings in DEX. If Telegram Wallet takes on the CEX experience, TON Space and DEX can interact on PC and mobile terminals. Finally, Telegrams Mini App and Bot will also be the trading front end of DEX or CEX functions. These designs meet the optimization of trading experience, but the native interaction part on the back-end chain is obviously backward.
At present, all DEXs we have seen, such as STON, Dedust, etc., only provide trading functions similar to Uniswap V1. In our analysis of the Soalna DEX ecosystem, we see that for DEXs on high-speed blockchains, it is important to provide trading liquidity, or modularize trading functions, so that the advantage of liquidity becomes the reason for users to choose.
For transactions on TON, the front-end entrance must exist in Telegram in large numbers. DEX still needs to increase the sophistication of its business like Jupiter, Balancer, etc., to achieve a balance for all users, whether they are users, token providers, liquidity providers, or platform developers. Each role requires certain refined functions to cooperate.
What projects on TON are working to improve DEX?
Compared with DEXs such as Uniswap, Balancer, and Jupiter, TON has not yet seen (or has not yet launched) a project that can fully complement all functions. However, after reviewing the public project design ideas in the entire ecosystem, the author found that the upcoming DEX on-chain transaction middleware LayerPixel has the potential to complete the TON DEX function supplement.
LayerPixel, incubated by TON public chain launchpad TonUP, is a DeFi solution designed for Telegram Mini App, officially called Layer 1.5. It can provide services including wallets and DEX (multiple trading algorithms). In addition to launching PixelSwap directly for C-end users, it also provides other applications with an embedded SDK kit based on Telegram Mini App for developing swap functions.
What TON needs is the existence of corresponding roles in the full-link scenario related to assets. This full-link includes asset issuance, asset trading, trading liquidity supply, oracle, asset pool, wallet, etc.
The function of IDO is to issue. On Ethereum, there are ordinary snap-up IDOs and LBP-style bidding IDOs. When snapping up, it is very easy to push up gas and token prices, which can easily cause prices to be artificially high and then plummet after opening. Therefore, the adoption of LBP, from a mechanism perspective, allows traders to reduce competition and consider buying after the price meets expectations. In the scenario link provided by LayerPixel, TonUP can provide IDO issuance, and it has added LBP rules to the issuance of TONs Launchpad.
After IDO, tokens begin to provide liquidity and combined transactions, and DEX intervention is needed at this time.
LayerPixels Pixelswap is a DEX based on a weight pool. It has the same functions as Balancer and supports the LBP asset issuance method. Moreover, this type of Dutch auction issuance method is suitable for small and medium-sized projects with low FDV. The most common projects in the Telegram ecosystem are games/GameFi projects of this type.
The more sophisticated the design, the more like mature LPs in centralized exchanges DEX LPs can proactively guarantee the rate of return on funds and isolate risks.
After token trading starts on DEX, Oracle, Pool and wallet businesses will follow.
Oracle is the process of providing real-time prices in AMM to external DeFi, DEX, aggregators, lending, asset bridges, etc. as a price source. Based on the rich AMM, it naturally has this capability; Pool is a tool that users can use to pledge other multiple assets for compound interest. When there are many DeFi on the chain, there will be multiple pTokens. For example, many Ethereum DEXs will provide exchange and pledge for Lidos stETH; finally, the wallet provides a user operation entrance outside of all trading platforms with the support of high-speed blockchain. Through transaction aggregation, Launchpad combination and other parts, all functions can be designed in the wallet and used in combination with other applications.
LayerPixel has designed IDO, token trading, wallets, oracles, Pools and other parts into its business chain. After communicating with its team, we found that its goal is to make up for the design deficiencies of DEX on TON, and hopes to become TONs DeFi middleware through multiple functions based on LayerPixel.
The news we have obtained so far is that the code part of LayerPixel has been developed and submitted to the audit company for audit. For security reasons, the audit is cross-audited by two audit companies, and the main network will be officially launched after the audit results are completed.
Final Thoughts
After observing the application of TON, we will find that TON is highly dependent on Web2. This design is to lower the threshold for Telegram users, but based on the experience of the development of multiple high-speed public chains, Telegrams official wallet may be more of a wallet verification tool in the future, assisting users to conduct more direct on-chain native transactions to ensure the security of assets and the correctness of Web3 interactions.
For public chains, DEX is a place where on-chain vitality is released. The goal of each DEX is to become a mature financial trading platform, allowing users to have accurate and mature asset management capabilities.
TON has been at ATH and its ecological value is also growing. When TON is developing at its peak, the data performance of the project value will be concentrated on the DEX trading pairs. For this reason, the more mature the development of DEX, the chances of investors seizing opportunities will increase exponentially.
