Functions of DEX–A Brief Overview
In 2010, after the Bitcoin White Paper was released to the global market, causing an uncommon economic and financial disruption, there were large, oscillating questions from its public users about the sustainability of its obviously innovative spirit. It was then, to some degree, a matter of finding new and sustainable solutions to the fresh and difficult problems always sprouting forth, across the crypto space–ranging from user-friendly adaptations to exchange patterns to fast-click transaction gaps. However, the bulk of these problems revolved around the methodology of exchange within the decentralized finance (DeFi) ecosystem.
The quest to solve, even if partly, some bigger problems of decentralized finance has consequently broadened its ecosystem over the years, tasking itself with invention of new applications, new terminologies, and new developments. This has also led to the creation of financial exchanges where users are able to engage in buying and selling of assets.
Centralized exchanges (CEXs) such as Bitfinex, and Kraken, were the first to come into the chart, existing for a period before the amalgamation of decentralized exchanges (DEXs). The high-key need for DEX, notably, was built from the frustrating limitations of CEX. Whereas centralized exchanges force traders to give up their assets to the exchange that would act as third-party souvenirs during transactions and also issue IOUs to the buyers and sellers for trading. DEX instigates the haven of peer-to-peer swapping of assets, through the aid of smart contracts, without losing custodial power over the supposed assets, thereby creating the viable ground to become partly free from recurring trends of hacks, scams and misrepresentations which are predominant happenings in CEX platforms as a central entity.
Notable Functions of Decentralized Exchanges
It’s no longer news that decentralized applications (Dapps) have taken the global market by their scruffs, with its trustless, easily accessible tools. And, consequently, in its unimaginable booming, the whole decentralized financial exchanges are touched as well, drawn into building top-level technologies to aid their forte, especially the decentralized exchanges. More than ever, DEX has grown from just a mere dot in the crypto industry to something worthwhile and an unfathomably important tool for traders. Who could have known that decentralized exchange would grow from a trading platform to a storage protocol to a staking site, and even to the newly implemented Borrow and Lending built-in feature within ecosystems like CrossFi. There’s nothing much to agree on except that the stone of innovation has been cast into the air of decentralized exchanges and we are speeding towards the trajectory of its majestic fall.
Below are the worthy-of-note functions of decentralized exchanges.
- Liquidity Sharing and Staking Pools
The future of decentralized exchanges is a wholesome, revolutionary one. As a blockchain-based application, Dapps and its users are able to acquire liquidity pools in a fast-paced environment, and even go as far as sharing and staking liquidity pools and tokens to earn great interests. That’s to say, buyers and sellers can invest in liquidity pools, which grows as the transaction rates skyrocket. Decentralized exchange apps such as CrossFi, in their bid to actualize their secondary objective which is to cancel out up to 30% liquidity qualms facing the Filecoin protocol and its sort, has in some many ways toppled the chart by creating an almost perfect and low-risk ground for investors to share their liquidity. What other greater miracle than to be able to generate a commendable liquidity ratio through fundraising and swapping with just the touch of a button.
- Lending and Borrowing
Transaction rates are sometimes incredibly high and might stray beyond a user’s premeditated logistics. The goal of the DEX lending and borrowing platform is to allow its users to engage in transactions without facing certain limitations that sprout from deficiency or not-enoughness of assets, and, in doing so, they devise simple and friendly ways for the user to pay back. For example, CrossFi, actualized this concept, without any glitch, by providing for the user a Filecoin synthetic asset (sFIL) which would serve as a collateral item and proof of the miner’s storage measure.
- P2P Exchange Chain
This is the first and foremost job of every decentralized exchange application: to allow investors or traders to engage in peer-to-peer transactions without the interference of middlemen, and in turn, still holding strong to their custodial authority. Just as the name implies, the main purpose of most DEXs is “disintermediation” — a breaking of strict fences that could incur government regulatory affairs, mismanagement of funds, and costly exchange data.
Conclusion
There are many other functions of DEX to be discussed and, matter-of-factly, there are still more coming to the fore. Every new hour seems to bring another new invention to our feet–and what can be done but to use what’s given to us as engagingly and as acutely as we can. The future is a seamlessly running tunnel.
About CrossFi
CrossFi (CRFI) is a cross-chain platform built on Filecoin which helps Dapp users to earn interests by sharing and staking their liquidity or tokens, and also to connect providers and clients across different multi-chain protocols with efficient and sufficiently advanced technologies.
CrossFi is a cross-chain protocol that provides liquidity to you for Filecoin staking and rewards.
CrossFi Official Website: https://crossfimain.com
CrossFi DApp Address: dapp.crossfimain.com
CrossFi Official Twitter Account: https://twitter.com/globalcrossfi
CrossFi Official Discord Group: https://discord.gg/UKGSX3VBY3
CrossFi Official Global Telegram Group: https://t.me/crossfimain_en
