Entity DeFi: 3 Groundbreaking Use Cases for DX25
Last month, Entity introduced our partnership with the next generation DeFi builders at DX25. Because DX25 will enhance several different aspects of the MultiversX ecosystem, we wanted to take a closer looking at some of the specific ways they are innovating to build the future of decentralized finance.
A new paradigm for finance
The future of DeFi is on the MultiversX blockchain.
The growing wave of DeFi projects on MultiversX is bringing new utility and adoption to the network. At the same time, innovative payment solutions like xMoney are helping bridge the gap between the physical and virtual worlds.
But a healthy ecosystem requires even more opportunities that attract a range of different players and grow the blockchain’s total value locked (TVL). One of the new projects that will make DeFi on MultiversX more dynamic and powerful is DX25.
DX25 is building an advanced DEX and range of features like derivatives and single-sided liquidity that will increase the amount of value on chain, boost adoption and help the ecosystem scale. In this blog, we will explain some of the key ways that DX25 is innovating to empower all types of users:
Let’s go!
#1) Making DeFi more accessible
In recent years, concentrated liquidity market makers like Uniswap V3 have made DeFi more efficient and helped liquidity providers earn greater yields. DX25 will bring these benefits to MultiversX, as users will be able to supercharge their returns by setting custom price ranges and fee levels when they provide liquidity.
However, this level of control can be intimidating for non-professional investors who lack the time or experience to constantly monitor and optimize their positions.
The same principle is true in traditional finance. While there are some individuals who can spend all day researching stocks and trading on sites like Robinhood, most people would rather leave that day-to-day work to the professionals. This means that the majority of investors delegate their assets to a fund manager, such as through a 401k or other pension plan contribution.
Yet recent bank bailouts and other inflationary monetary policies have eroded the public’s faith in traditional financial institutions, and there is still not a fully developed solution in the blockchain world. Most Web3 fund management comes in the form of centralized exchanges, which have had their own share of issues with transparency and collateral risk.
This is where decentralized protocols like DX25 come into play.
Users who want to easily enjoy the benefits of DX25’s concentrated liquidity protocol can join a Liquidity Management Pool and automatically earn next-level DeFi yields. After putting in your assets, the pool will follow simple algorithms that use recent historical data to maximize the returns for your deployed capital.
These pools will regularly rebalance themselves based on factors such as market conditions and recent trades to make sure that your funds remain in play. Essentially, DX25 will give Web3 users benefits like a mutual fund manager would provide in traditional finance, while keeping everything transparent and secure on the blockchain.
“We also don’t think we will be a monopoly on knowing how to get those algorithms right. So we fully intend to open it up so that anyone can write the algorithms for that, put them in, and if they’re successful, they will get a portion of the return.”
-James Davies • Chief Product Officer at DX25
Since decentralization is important, the DX25 community will also be able to submit their own algorithms and share in the returns. This means that advanced users will be able to earn rewards for contributing to the success of the protocol, while also helping onboard new users and increase MultiversX DeFi adoption at the same time.
2) Making tokens more liquid
In general, DX25 is built to attract more liquidity to the MultiversX ecosystem.
But what about small to mid-sized projects that have illiquid tokens? For some builders, your typical DEX listing is not always the best course of action. Being listed on a market maker can be quite expensive, since there are minimum liquidity requirements that can put pressure on your project.
With DX25’s Auctions feature, these projects can hold a fair price discovery process for their token without the need for high overhead costs or contributions from liquidity providers. These auctions will take the form of a bidding period where the market establishes a fair price between a specific ESDT token and a stablecoin.
Once the auction is over, the offers and bids will be matched and settled at the determined price. A period of follow-on trading will then continue for a short duration afterwards, during which time swaps can be made at the final rate established by the auction.
These auctions can be repeated on a regular basis, or whenever there is specific purpose that suits the project. Overall, DX25 Auctions will provide a fair and transparent process that gives investors special opportunities and helps smaller projects to invigorate their token.
3) Making DeFi more efficient
Yet another way that the DX25 Team is innovating on MultiversX is through their cutting-edge Adaptable Exchange Pools.
Adaptable pools are a novel DeFi mechanism for reducing liquidity fragmentation and improving capital efficiency. Instead of having separate liquidity pools for every fee level like on Uniswap, DX25 combines all fee levels in one place.
This makes life easier for liquidity providers, swappers, projects and builders.
- Liquidity providers can laser target their capital without needing to monitor multiple pools
- Swappers enjoy a simplified and more efficient user experience
- Projects can maintain sufficient liquidity throughout changes in volatility, since liquidity providers can easily adjust their fees
- Builders can develop on top of DX25’s foundation more efficiently without needing to route through multiple pools for the same token pair
Since swaps use liquidity with the lowest fees first, this creates more healthy market competition for all users. The level of efficiency from DX25’s pools will put them ahead of the game for not just MultiversX, but the broader Web3 ecosystem as well.
“(Adaptable Exchange Pools) change the game theory, change the complexity level, and really start to encourage the fees to be set to the market rate to be as competitive as possible.”
-James Davies • Chief Product Officer at DX25
With more efficiency and a simpler overall experience for a range of stakeholders, we are confident that this new type of liquidity pool will be a DeFi game changer for years to come.
Creating a vibrant ecosystem
Overall, these novel features from DX25 will work together in harmony to help take MultiversX DeFi to the next level.
DX25 combines the best aspects of TradFi, like proper derivatives and fund management, with the best aspects of Web3, like decentralization, security and transparency. By offering the streamlined experience of a CEX, plus the power of a DEX to control your own keys and assets, DX25 is in a great position to kickstart DeFi mass adoption.
The result will be a truly revolutionary experience for everyday users, DeFi experts, Web3 builders and more.
Innovations such as Liquidity Management, DeFi Auctions and Adaptable Exchange Pools will support the existing ecosystem while helping bring in new users of all kinds. When more investors participate, the whole ecosystem benefits from better spreads, better slippage and better yields.
Slowly but surely, MultiversX can reach its potential as a top DeFi chain with the support of more pioneers like DX25.
Big things are on the way
To learn more about DX25, we recommend reading their litepaper, following their official Twitter Page, and joining the conversation on Telegram and Discord.
And since you don’t want to miss any big announcements from Entity coming up in April, so don’t hesitate to join our community on Twitter and Telegram and subscribe to Entity’s Official Newsletter.
Enhancing the MultiversX Ecosystem
Entity is a Launchpad and suite of cutting-edge tools for Web3 builders and investors. Entity is focused on catalyzing growth in key areas such as DeFi, GameFi, NFTs and real-world blockchain applications.
MultiversX is a highly scalable, secure and decentralized blockchain network created to enable radically new applications, for users, businesses, society, and the new metaverse frontier.
