Mar 8, 2021
How will Zenlink help improve the liquidity with the Expansion of Polkadot Defi?
As a major event in 2021, Polkadot Lease Offering (PLO) has started to warm up.
Up to now, 11 parachain projects (including system parachains) have been successfully connected to Rococo V1 test network, and Zenlink, Bifrost, ChainX, and other projects are also about to be connected. According to the steps of PLO, the PLO on Kusama, Polkadot’s Canary Network, will kick off first after all the approved projects have been connected to the Rococo V1 test network and running steadily.
As for Polkadot, PLO is undoubtedly an important milestone and also an important step for the dApps building on it to be put into actual use. The launch of PLO will greatly enrich the application scenarios of the entire Polkadot ecosystem, thus truly opening a new chapter of Polkadot’s DeFi ecosystem that allows users to participate and experience.
Zenlink will also launch its testnet after the start of the PLO, and before that, we think it is necessary for us to explain the ways that Zenlink, as one of the leading Polkadot’s cross-chain DEX protocols, will help to greatly improve the liquidity of different assets within Polkadot’s DeFi ecosystem.
“Plug and Play” Zenlink DEX Module
Due to a lack of adequate understanding, many new community members think that only the projects that participate in Polkadot’s PLO are high-quality projects. In fact, not all projects have to be a parachain and participate in the upcoming PLO on Polkadot.
Zenlink is not a parachain project and is committed to improving the liquidity between different parachain assets. So it is a protocol or application layer project on Polkadot and will not participate in the PLO. For Zenlink, the access to Rococo V1 test network is to test our product in a better way before the official launch.
As a core way to enable parachains to share liquidity with others, Zenlink DEX Module is a general and pluggable DEX module that allows different parachains to have DEX capabilities simply by one-click, such as Swap and create trading pairs.
More importantly, parachains on Polkadot network can quickly implement DEX on the parachains by introducing “Plug and Play” Zenlink DEX Module and can connect to a wider Zenlink DEX Network. While the tokens on the parachain inject liquidity into the Zenlink DEX Network, they also get a more free flow of values with other parachains and DOT.
When Polkadot’s PLO is officially launched, there will be a large number of applications built on different parachains, which also means that liquidity will be scattered on different parachains. Zenlink will step in at this point and act as the DEX hub of these liquidities. By integrating the Zenlink DEX Module, Zenlink can enable parachains to share liquidity with other parachains and converge the isolated liquidity into a huge liquidity network in the end.
This also means that Zenlink DEX network will be able to capture the liquidity of the Polkadot ecosystem to the maximum extent so that users can not only complete the exchange easily and quickly but also enjoy a low slippage transaction experience without worrying about which parachain they are trading on.
At present, Zenlink is waiting to connect to Rococo V1 test network for Zenlink DEX Module integration testing and cross-chain testing. At the same time, we have also entered into partnerships with multiple high-quality projects such as ChainX, Bifrost, Plasm, Phala, and Darwinia, and will jointly carry out the technical adjustment in the Rococo V1 test network.
It is worth pointing out that Gavin Wood, co-founder of Polkadot, retweeted one of Bifrost’s official tweets as below:
All-inclusive Zenlink DEX Aggregator
Compared with other Polkadot-based DEX, Zenlink is very different in its product and technology implementation. While most of them are built based on their own parachains, Zenlink decides to connect to the Polkadot network by Module, which will make Zenlink more flexible and lightweight.
Each parachain on Polkadot is essentially a completely independent collection of freely programmable Runtime Module, which makes it easy for all parachains to integrate Substrate-based Zenlink DEX Module. So what Zenlink needs to do is to combine the Module in multiple parachains together to establish a decentralized cross-chain DEX network. Based on this, Zenlink has a natural advantage in liquidity capture.
In addition, Zenlink will also build a Zenlink DEX Aggregator for a one-click connection to all DEX on Polkadot and other chains. At present, there are many other DEX projects within Polkadot ecosystem, such as Homa (Acala), PolkaSwap, HydraDX, and Polkadex.
As we all know, it seems that DEX has a great tendency to overrun CEX since the advent of Uniswap, but there are still some defects in DEX trading. For instance, when the liquidity provided by LP (liquidity provider) under the AMM mechanism is insufficient, it will result in a high slip point. And with the emergence of more and more DEX, these liquidities will be further dispersed. Later, the emergence of DEX aggregators is well welcomed by the market as they can help to solve the problems of high slip point and tedious operation. Among them, Ethereum-based 1inch is a typical example.
Similarly, Polkadot’s DEX will also encounter the same problem in the future. The emergence of multiple DEX networks will split liquidity, so it is necessary to create a DEX aggregator on Polkadot. At Zenlink, we have taken this into account at the very beginning and set out the goal of building a Zenlink DEX Aggregator in our whitepaper.
Zenlink DEX Aggregator is not only a major goal of Zenlink but also an indispensable part of the future Polkadot DeFi ecosystem. Decentralized protocols, various types of DEX, and separate trading assets can all be provided to users through Zenlink DEX Aggregator. Specifically, Zenlink DEX Aggregator will integrate the liquidity and pricing of all kinds of DEX, compare the optimal prices in different trading protocols, and provide users with optimal trading and minimum slip points.
Due to the high Gas fees, Ethereum-based DEX aggregators such as 1inch also need to take Gas optimization into consideration when designing products. However, as it is often very difficult to reach a balance between Gas optimization and route calculation, it can even result in paying more Gas in a transaction for users. While Polkadot-based Zenlink DEX Aggregator will not be bothered by this problem and therefore can put more efforts into improving the performance of smart order routing.
Generally speaking, as more and more parachains are connected to the Rococo V1 test network and run steadily, PLO is close at hand, and the ecological picture of Polkadot DeFi is gradually emerging. As a cross-chain DEX protocol based on Polkadot, Zenlink will play an important role in capturing the liquidity of Polkadot ecosystem. And the combination of Zenlink DEX Module and Zenlink DEX Aggregator will help Zenlink reach this goal to the greatest extent, thus providing users with better trading depth and lower slip point, and making Zenlink become the preferred Polkadot cross-chain DEX protocol for users.
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