TomoX vs 0x — Build the decentralized exchange protocol for the future

Decentralized Exchanges (DEXs) have been becoming the top focus of the cryptocurrency industry and will become the de facto standard for exchanges in 2020. Not only remove the security problem in centralized exchanges, DEXs also enable decentralized finance (DeFi) applications. Even though a significant number of DEXs have been developed since 2017, some of the main challenges, i.e. performance, liquidity, of DEXs have not been addressed.

This article points out the problems in DEXs, shows how TomoX solves those challenges and compares the differences between TomoX and 0x — a DEX protocol aiming to solve the liquidity problem in DEXs.

Problems in today’s DEXs

• User experience: Slow, high latency, high trading fees could be used for describing most of the current decentralized exchanges most of which such as IDEX rely on the heavyweight, slow Ethereum blockchain where high fees including Ethereum network fees and trading fees are applied.
• Liquidity: Separate small, low liquidity DEXs with bad user experience make it hard to attract crypto users, thus reducing the liquidity provision of those DEXs.
• Decentralization: Most of those DEXs are semi-decentralized. For example, IDEX, BinanceDEX, and 0x have a centralized order book.
• Bridge support: The majority of those DEXs only support trading pairs for tokens issued on the same blockchain the DEXs are running on.

TomoX — learning from the failures of the existing DEXs

“Build things that bring value to people”’ is what all of us at TomoChain aim for, and TomoX is not an exception. If you haven’t heard about TomoX, here’s the TomoX whitepaper that we recommend you to check its architecture and economics incentives.

In short, TomoX is a decentralized cryptocurrency exchange protocol that aims to solve all of the aforementioned problems.

• Frictionless user experience: Fast, smooth, secure, and stable is used for describing traders’ feelings while trading on TomoX relayer Testnet. TomoX is built in the core of the super-fast TomoChain blockchain, thus bringing instant trade settlement once orders matched. Matching engines and trades are all executed on-chain. Users are free to trade from any token for any other token without going through intermediate coins/tokens such as BTC and ETH. The fee mechanism in TomoX is also designed from the ground up: You pay trading fees in what you are trading (same user experience in centralized exchanges) instead of in irrelevant currencies, i.e. ETH, just to pay the network fees, which is just nonsense. What this means is that you pay fees in Triip token if you are trading Triip for AIS, for example.
• Built for liquidity: TomoX gathers all existing, separate, ad-hoc trades from small exchanges to create a giant order book, thus significantly increasing liquidity. TomoX allows up to 150 relayers (similar to exchanges) to create a liquidity network across different countries in the world. Now imagine 150 exchanges (relayers) with 100k orders all combined together will create a giant order book of 15M orders. That’s how TomoX will sustain from the lack of liquidity in most current DEXs.
• Full decentralization: There is just no single point of failure in TomoX. All users manage their own private keys and funds. The giant order book is decentralized to the network of 150 masternodes and more fullnodes. Trades are all verified by all masternodes. This is a significant advantage over IDEX and 0x where the order book is stored in a centralized server, thus showing a single point of failure.
• Bridge support: TomoX integrates TomoBridge — a module that allows for cross-chain bridging from other chains like Bitcoin, Ethereum to TomoChain and vice versa. This means, with TomoX, you are able to trade BTC or ETH for any kind of tokens in a decentralized way!

If these are all reasons to motivate any trader to trade on TomoX, here are the incentives for you if you are a business who would like to make money from exchanges operations.

• A full package for you to launch your own DEX:

— TomoX SDK provides an open-source, free-to-use TomoX DEX template that can be used to immediately launch a DEX

— TomoX simplifies tech requirements to allow businesses to focus on customer acquisition and quality value-adds from Day 1.

— TomoX removes the significant cost of maintaining exchange wallets in centralized exchanges as users keep their own funds with their private keys

• Users have complete control over their assets as opposed to centralized exchanges that require deposits into exchange wallets.
• TomoX offers relayer tools to easily manage (add/remove) the tokens listed on relayers. With the integration of TomoBridge, your cost of listing additional tokens will be reduced to almost zero.

TomoX vs 0x

If 0x is the first liquidity network protocol to increase liquidity in DEXs, TomoX will be the protocol that makes DEXs built on TomoX become a product used by every crypto user.

The 0x protocol is an open protocol for decentralized peer-to-peer exchange on the Ethereum blockchain. 0x builds a layer of networked liquidity and enables businesses and projects, known as relayers, to easily add exchange functionality.

Let’s look at what TomoX stands out from 0x.

Layer 1 vs Layer 2

TomoX protocol is integrated directly into the core layer of TomoChain blockchain, benefitting from the high performance and fast confirmation time of Proof-of-Stake Voting (PoSV) consensus. On the other hand, 0x operates as a DApp at the layer 2 of Ethereum. Here’s the thing: TomoChain TPS is 100x times faster than Ethereum. Also, the integration at the core layer also profits from the fast computation at layer 1 over the lower computation speed at layer 2.

Full decentralization vs semi-decentralization

The order book of TomoX is replicated on and maintained for availability by all nodes of the TomoChain network, thus eliminating the single point of failure in 0x where the order book is stored in a centralized server.

Speed

Due to the integration at layer 1, TomoX will be at least 50x times faster than 0x. We strongly believe that TomoX will provide the fastest DEXs once launched.

Liquidity

Due to TomoBridge integration, TomoX will bring liquidity from other chains, thus attracting more users to trade on TomoX relayers.

Fee mechanism

By default, TomoX allows for paying trading fees in tokens while it is optional in 0x. On the other hand, a trader can trade a token for any other token directly, instead of trading through intermediate coins like ETH as in most of current DEXs.

Operating cost

TomoX has a relayer dashboard that allows a relayer owner to easily manage the tokens listed on their relayer. Adding a token to their relayer requires almost zero fees.

Ecosystem support

If 0x is only its relayer network, TomoX is supported by the whole TomoChain ecosystem, especially the TomoChain’s decentralized finance ecosystem.

In a perfect world, a decentralized exchange would exist fully on-chain. But this is difficult if you want to implement a maker/taker exchange model (the most efficient price discovery mechanism) because every order posted would require a fee (gas). If a fee is needed just to post an order, market makers will be discouraged, which is exactly what you don’t want to do. Another factor is latency, the ~15s block times on Ethereum are too slow for an order-booking system where you need to be able to facilitate thousands of orders per second.

Without a solution for the blockchain scalability problem, the importance of the 0x protocol will be gradually reduced. Remember that Ethereum can only process 15 TPS.

“The blockchain we are most interested in supporting next is EtherMint, an EVM blockchain with Tendermint consensus that will be part of the Cosmos network and that supports 10–100x more TPS than Ethereum.” — Will Warren

Fortunately, TomoChain has 2s blocks and 2,000 TPS with very low fees (less than 1/100th of Ethereum). With all of this, TomoX is in a very interesting position in the present and future of the decentralized exchanges world.