CoinMarketCap takes a deep dive into one of the new projects in the Polkadot ecosystem.
Decentralized exchanges, or DEXs, have become somewhat of a phenomenon in recent months — largely thanks to an explosion in interest surrounding decentralized finance and cryptocurrencies in general.
But current decentralized exchanges tend to suffer from the same range of issues. They’re often slow, can be expensive and many lack the liquidity necessary to keep slippage low. But that might be set to change with the development of Polkadex — a Substrate-based DEX that boasts several innovations.
What Is Polkadex (PDEX)?
Polkadex is a platform that looks to take the best parts of centralized and decentralized exchange platforms, and wrap these up into a holistic solution that preserves self-sovereignty of funds and security while providing an intuitive trading experience.
The platform consists of several main products, which include:
social
- Polkadex Orderbook — a decentralized order book-based exchange platform with no custody of funds.
- Polkadex IDO Platform — an IDO platform for Substrate-based tokens.
- Polkadex Mobile — a mobile trading app that supports cold wallets.
- Polkadex decentralized blockchain network — a decentralized parachain/blockchain that supports swap protocols with feeless swaps and no front-running.
Polkadex Orderbook is the flagship product. It is designed to support up to 500,000 transactions per second with sub-millisecond latency — allowing for things like high-frequency and algorithmic trading. It also supports both Ethereum and Substrate-based assets, initially via ChainBridge and later on via trustless on-chain bridges powered by a technology known as “Snowfork” (more on this later).
The platform aims to make decentralized trading more accessible and powerful by maximizing liquidity and cross-chain support, as well as by becoming one of the first decentralized exchanges to support fiat currencies via Polkadex Fiat.
The Polkadex product suite is currently being built by a 20-member strong team led by CEO (and acting CTO) Gautham J and includes advisorial support from notable advisors including Garlam Won and Matthias Hafner.
The platform conducted its initial DEX offering (IDO) on Polkastarter in April 2021 and the PDEX token was released for trading shortly after. It's currently available to trade on a handful of popular exchange platforms, including KuCoin, Uniswap and Gate.io.
How Does Polkadex Work?
The Polkadex ecosystem of products is being built on Substrate — a framework that powers Polkadot and allows developers to easily deploy application-specific blockchains.
The Polkadex blockchain is purpose-built for a decentralized exchange and includes several features designed to make trading safer and more inclusive. These include a major focus on the user experience and eliminating gas fees.
Polkadex will make use of ChainBridge initially to bridge assets from Ethereum. Once parachain is secured, it will be utilizing Snowfork, another project in the Web3 ecosystem. This will be used to bridge Ethereum-based assets (e.g. ETH and ERC-20 tokens) to Substrate allowing them to be traded on Polkadex Orderbook.
The Polkadex Orderbook platform will also feature a number of tools designed to make trading both easier and more profitable. One of these is its asset delegation capabilities, which allow users to delegate their assets to a third party — such as a fund manager or algorithmic trading bot which can then trade on their behalf.
Since Polkadex Orderbook is a decentralized trading platform, users retain full custody of their funds (unless delegated) and do not need to create an account to source liquidity.
As of Q2 2021, Polkadex is currently running on its V2.0 testnet and launch of V3.0 of the testnet is planned for June 21, 2021. Mainnet launch is currently scheduled for Q3-Q4 2021 (on or before Sept. 15, 2021) along with development of the Polkadex parachain.
What Makes Polkadex Unique?
The team behind Polkadex are looking to leverage the latest blockchain technologies and create novel technical solutions to power its decentralized exchange and other products.
Much of its capabilities are enabled by building on Substrate — the same framework that powers Polkadot and several other upcoming platforms. Below, we take a look at some of its key distinguishing features.
It’s Orderbook-Based
Unlike most popular decentralized exchanges of today, Polkadex Orderbook is not an automated market maker (AMM) — which means it doesn’t use a ratio of assets in a liquidity pool to automatically set the value of assets. Instead, it’s closer to what you would expect from a centralized exchange, in that it offers a full order book consisting of bid and ask orders.
Zero Fee Trading
Polkadex Orderbook will support two order types: limit orders and market orders. There will be a small trading fee for market taking orders while market making orders will be completely free. On top of this, there are no gas fees or network fees for placing and removing orders as you would normally expect in a decentralized exchange. This makes it easy for trading bots and other API-based bots to engage in high-frequency trading.
Polkadex Fiat
Polkadex Orderbook is set to become potentially the first decentralized exchange to support fiat currencies thanks to its decentralized KYC capabilities. After verifying their identity using Polkadex's cryptographically secure KYC identification process, users will be able to purchase tokens directly using fiat (e.g. via credit card or bank transfer) without having to rely on a custodian. In essence, the Polkadex blockchain and application never stores user data. It receives cryptographic proof from another blockchain to verify unique users’ credentials.
Polkadex IDO Platform
Polkadex looks set to develop an IDO platform (with a testnet launch scheduled on July 5) for projects launching on Substrate and Ethereum — helping promising projects raise funds and bootstrap the distribution of their token simultaneously. Current features planned for the IDO platform include: zero gas fees, affordable fees (for projects and investors), on-chain governance and plug and play token creation features (e.g. vesting schedule and token support).
How Does Polkadex Compare With Uniswap?
As is common in the world of cryptocurrency, decentralized exchanges tend to be one of the first applications launched on a new blockchain platform. However, in most cases, these exchanges fit squarely into the AMM category and support either fixed ratio or dynamic rate swaps.
By far the most popular of these AMMs is Uniswap, a decentralized exchange running on Ethereum. Naturally, Uniswap is likely to be Polkadex’s major competitor, but while the two share some similarities, they have many differences.
For one, Polkadex supports a full order book, which uses a trusted execution environment (TEE) to ensure trades are securely matched. Uniswap, on the other hand, uses a bonding curve and sees users trustlessly draw liquidity from one or more liquidity pools.
Moreover, Polkadex is built on Substrate — a high speed blockchain platform that enables it to handle a large number of simultaneous transactions without buckling. This, in addition to its feeless swaps, aims to address the congestion and high fee issues that have crippled Uniswap in the past.
But arguably the most significant of these is Polkadex’s social KYC and fiat support. Unlike Uniswap, Polkadot allows users to complete social KYC (KYC through social media) and create orders using fiat currencies. This feature is offered alongside its standard crypto to crypto trading.
Nonetheless, both platforms are considered decentralized exchanges and can be accessed by anybody, anywhere, without needing to create an account. They’re also non-custodial, ensuring users retain full custody of their funds while trading.
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