DEXs on Polkadot: Leveraging the Power of Substrate & Shared Security
Ever wondered about the differences between the DEXs built on Polkadot and the ones launched in other blockchain ecosystems? Let’s dive into the structure of some Substrate-based trading platforms and understand why they have different unique designs.
There are two major types of platforms to exchange crypto. Centralized Exchanges (CEXs) are controlled by a central entity and use Market Makers to create liquidity. In opposition, decentralized ones (DEXs) have, as the name hints, a decentralized nature, running permissionlessly via smart contracts. They use most often Automated Market Makers (AMMs) and depend on the users to provide liquidity. These aren’t the only differences between DEXs and CEXs, so if you want to have a broader understanding of the subject, check our article, DEXs: The What, The Why & The How of Decentralized Exchanges.
Although the most well-known and used DEXs aren’t built on Polkadot (Uniswap started on Ethereum- and Pancakeswap is on Binance Smart Chain), the ecosystem is bringing some interesting players to the table. HydraDx, Solarflare, Arthswap, Polkadex, Polkaswap, Stellaswap, and Zenlink. Know more about each here.
Polkadot DEXs vs Other Ecosystems
Some DEXs on Polkadot are built differently than on other ecosystems thanks to its unique architecture and features. Its interoperability allows it to seamlessly connect different projects within the same ecosystem.
DEXs on Polkadot may capitalize on this capability to offer trading pairs involving assets from various chains, broadening the range of available trading options. The ecosystem’s bridging function opens up a world of possibilities for countless use cases, including DeFi, specifically, DEXs. Some decentralized exchanges on Polkadot only allow you to exchange tokens within the ecosystem, but parachains like Moonbeam developed DEXs that allow trading via bridging. According to this article, “bridges can be used to transfer data — for trading purposes, for example — from external blockchains onto the Polkadot network, after which it can be used by other parachains on the network.”
it’s important to understand that projects can have their tokens — or “wrapped” versions of them — listed in DEXs built in different ecosystems. DOT (Polkadot’s token) is now listed on Uniswap, an EVM-based platform available on our ecosystem via Moonbeam.
Different DEXs on Polkadot
Traders know DEXs as platforms where they can buy and sell crypto, but different types serve different purposes and offer different services. Projects such as HydraDX and Polkadex (1) are specifically designed for trading within the Polkadot ecosystem. (2) DEXs as dApps are a different model, and it’s the one that smart contract parachains follow, like Stellaswap, Solarbeam (on Moonriver), and Arthswap (on Astar). Then there are the (3) DEX aggregators like Zenlink — the idea is, as the name implies, to gather multiple exchanges in one interface. This allows users to trade across different platforms, making Zenlink the perfect platform for those who wish to trade assets across DEXs.
Some Popular DEXs on Polkadot
HydraDx
HydraDx is a DEX parachain on Polkadot with its equivalent, Basilisk, on Kusama. According to the project’s founders, “Basilisk AMM pools filter new assets by allowing them to bootstrap liquidity before entering the HDX Omnipool. If a “bad” token enters the HDX Omnipool directly, it could pose a security threat allowing malicious actors to withdraw liquidity.” HydraDX’s unique Automated Market Maker, Omnipool, combines all assets in a single trading pool, thus ending liquidity fragmentation. Basilisk is a liquidity protocol and its first version comes with the Snek Swap AMM — it uses XYK pools.
Polkadex
Why did the Polkadex team decide to build on Polkadot? It’s easy: it offers higher scalability and faster transactions compared to other ecosystems like Ethereum. According to Polkadex’s Git Hub, “Substrate also allows us to add new features and constantly develop the Polkadex platform without going through complicated and lengthy processes including hard forks”. The network is much faster because transactions on Polkadot are processed in parallel. The fact that the ecosystem itself brings together a diverse collection of projects is also very beneficial for a decentralized exchange platform that wants to aggregate several tokens.
Zenlink
The Zenlink DEX Protocol’s idea is to bring all the Polkadot-based DEXs together — this project (which isn’t a parachain) is about making the most of the ecosystem’s interoperability feature. In a way, it’s an interface that connects some of Polkadot’s projects, with plans to connect more in the future. It aims to provide liquidity to all the other decentralized exchanges by enabling “parachains to quickly possess DEX capabilities and share liquidity” with other projects.
Zenlink is designed to seamlessly integrate with Polkadot parachains, allowing for efficient cross-chain asset transfers and trading. This integration enables Zenlink to leverage the unique features and functionalities offered by various parachains within the Polkadot ecosystem, further enhancing its capabilities.
Stellaswap
Stellaswap is one of the most popular exchanges on Polkadot. It’s a DEX on Moonbeam offering liquidity mining, farming, and concentrated liquidity with Pulsar. StellaSwap allows you to bridge assets from different protocols, including Ethereum and BSC through Wormhole bridges. The project also provides cross-chain swaps.
Solarflare
Solarflare is a DEX on Moonbeam. They are great for liquidity mining, farming, and using XC-20 tokens. They bring to life the biggest Polkadot and Kusama smart contracts and have the advantage of allowing users to use XC-20 tokens (Moonbeam’s representation of native Ethereum tokens, ERC-20).
Polkaswap
Polkaswap is a cross-chain DEX aggregator designed to swap tokens within Polkadot and from other ecosystems via bridges. Recently, Polkaswap launched a 100% decentralized on-chain order book where all the orders and transactions get recorded in the blockchain. This will surely drive more people to use the Polkadot-based DEX: it now operates very similarly to CEXs, where most crypto holders trade, but with everything kept on-chain. Besides enhancing the trading experience, Polkaswap is keen on promoting transparency, security, and freedom by operating with non-custodial wallets.
Arthswap
Arthswap is a DEX in the Astar Network, a Substrate-based blockchain project bringing EVM and WASM functionalities to Polkadot and focusing on smart contracts. It makes it easier to enable the cross-use of dApps from Ethereum on its native ecosystem, facilitating the creation of a wide array of different applications requiring smart contracts. As for Arthswap, trading, staking, IDO launchpad, and liquidity farming are its main functions.
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