DAI Liquidity on DEXs

How to get liquidity for DAI through decentralized exchanges

Totle

Published in

Totle

3 min readApr 24, 2019

Building DAI liquidity into your DeFi tool can be tricky.

Although the vision for DeFi services is to be completely decentralized, DeFi developers can be pressured into using centralized sources for DAI liquidity to meet their customers’ immediate needs.

In this article, we explore DEX liquidity limitations and how Totle enables you to build DAI liquidity into your DeFi service without compromising decentralization.

DEX Liquidity Experiment

To get a glimpse into the current state of DAI liquidity on DEXs, let’s see how much DAI we can buy.

Buying 3000 DAI

At 3000 DAI, we can see there are some price discrepancies, but we can get the DAI liquidity needed and at a good price.

Buying 30,000 DAI

At 30,000 DAI, we can see price discrepancies have become substantial but our goal is still achievable and at a reasonable price.

Buying 300,000 DAI

At 300,000 DAI, we start to see a problem. There are very few DEXs that can handle this level of volume and DAI has become overpriced.

Note: DDEX is a hybrid decentralized exchange.

Buying 3,000,000 DAI

Here we can see that buying 3,000,000 DAI through one decentralized exchange is not offered.

*Thank you to AirSwap for their DEXIndex tool. It made running this experiment easy.

An Honorable Mention: Eth2Dai

Our partner, Eth2Dai, is one of the most underrated tools in the Maker and Ethereum ecosystem. As the name suggests, Eth2Dai offers a simple way to swap ETH for DAI.

Eth2Dai has been quietly providing a ton of value to developers and traders in need of a convenient way to acquire DAI. They have reasonable spreads and a healthy supply of liquidity.

Liquidity Experiment Implications

Our DAI liquidity experiment shows that no one DEX can provide enough liquidity to support large transactions.

We also found that DAI pricing between DEXs can vary considerably which makes consistently getting the best price for DAI through DEXs challenging.

Leveraging Multiple DEXs for DAI Liquidity

To source large quantities of DAI through DEXs and consistently get the best price for every conversion your product makes, use Totle.

Totle gives you access to multiple decentralized exchanges through an API. By leveraging a suite of smart contracts and determining the optimal way to route orders, Totle allows you to tap into a large supply of liquidity at the best prices on the market.