DeFi Observation: The Change of DEX Decentralized Exchange

Editor's Note: This article comes fromWebX Labs Daily (ID: gh_3bc595acebaf), reprinted by Odaily with authorization.

WebX Labs Daily (ID: gh_3bc595acebaf)

, reprinted by Odaily with authorization.

Uniswap V1 - the most basic decentralized exchange

Based on the exchange pool transaction mode of AMM (automatic market maker), any ERC20 token and a certain amount of ETH can be deposited into Uniswap to create a new exchange pool transaction pair, and then any user can exchange tokens and ETH through this exchange pool trade.

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Uniswap V2 is mainly based on Uniswap V1 to upgrade two types of functions. First, it improves the transaction capacity of the exchange pool. The V1 model only supports the exchange pool between ERC20 and ETH. V2 can add exchange pools between any tokens, adding The width of the market is no longer limited by the ETH market.

Secondly, the lightning transaction function is added, which is similar to the application of the lightning loan model to market arbitrage transactions. First, tokens are lent from Uniswap, and then arbitrage transactions are performed on the exchange pool with arbitrage space in the market. If the transaction is profitable, the transaction confirmation is successful. If the process If any stage fails, the transaction will be cancelled, and the price of the exchange pool will be closer to the market price by introducing the price of the oracle machine and the lightning transaction mode.

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1inch is an aggregated exchange on the chain, which summarizes the liquidity among mainstream DEXs. When trading on 1inch, a transaction may be split into many transactions. By comparing the advantages of transaction costs in the market for splitting, a transaction order may That is, it is connected to uniswap, and part of it is connected to CoFIX.

If the market liquidity of the trading pair you choose is poor, the system will split the trading pair again, such as DAI to ETH, it may become DAI to USDC and then switch from USDC to ETH, avoiding transactions through multiple transactions The transaction cost caused by slippage is too high, but this transaction mode also needs to pay attention to whether it will generate too high Gas fee, if the Gas fee is too high, the loss outweighs the gain.

1inch has dealt with the problem of insufficient liquidity in market transactions from another perspective. Most other exchanges solve the problem by absorbing the depth of liquidity in other exchanges to make up for their own insufficient liquidity. Users connect to the exchange pool, and then connect to other exchanges from the exchange pool. Liquidity providers, and 1inch directly uses transaction splitting to enable users to achieve the lowest market transaction costs, and the overall transaction process is transparent to make transactions more fair and open. At the same time, it is similar to Uniswap’s problem. Whether the lack of immediacy of transactions caused by too many splits will be another transaction cost for the accommodation of transaction orders.

CoFIX——Introducing institutional-level market makers from the perspective of risk control

CoFIX attaches great importance to risk control in decentralized exchanges. The shutdown mechanism and shock risk control are a kind of protection for traders and market makers in the market. The increase in transaction costs is usually unacceptable, and manual control usually leads to irreparable losses when the market fluctuates violently or super-large orders appear.

CoFIX's computable financial transaction model concept, the introduction of institutional-level market makers into DEX exchanges is an improvement in the nature of market liquidity. Institutional-level market makers usually connect most of the trading institutions. When the transaction cost is low enough, it will centralize Part of the liquidity in the exchange is passively introduced into the decentralized trading market.

Trading after assessing risks is the basis of a trader, and the controllable risk range is also the basis of an exchange. It is undoubtedly the most correct to enter after assessing the risks that the market may bring. The security of funds brought by DEX, But in the case of violent market fluctuations, the stability of the exchange is equally important. Similarly, the problem with CoFIX is the singleness of the product, and whether the computational financial transaction model can be optimally replicated in tokens with poor liquidity.