Liquidity Strategies for DEXes

[weidex]

Hey guys, our CEO has made an article where he gives a brief overview of liquidity strategies for decentralized exchanges. If you are interested in and want to read something cool go ahead. It can be useful for some of you!

https://medium.com/@titotitov/liquidity-strategies-for-decentralized-exchanges-part-i-f700461be5db

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[motienvolam]

The part I is interesting, and I am waiting for the part II. However, to increase liquidity, I think that key thing should be considered is how to attract crypto enthusiasts to DEXes. By now, they tend to prefer centralized exchanges, rather than DEXes. They have some reasons to think that centralized exchanges can give them better experience, better security, and better supports. Furthermore, fees on DEXes usually high if traders don't own coins of DEXes. such as for dex run on Bitshares network, fees of withdrawals will be cheaper if traders own Bitshares and pay their fees via Bitshares. I meant, building up DEXes more attractive, cheaper fees will help them increase liquidity indirectly for the long run.

[Yankeeruinx]

Stakenet (XSN) are aiming to fix these issues with their upcoming DEX which utilises Lightning Network and their one click Lightning Swap solution.

The DEX will run straight from their Multi-Currency Lightning Wallet so no need to move your assets anywhere and the entire DEX is hosted on their Masternode Network. All trading fees earned by the DEX are paid back to the Masternode owners running the DEX too. Their Lightning Swap tech means trades are instant so will have the speed of a CEX while ensuring the security of a DEX, they also have built in privacy options like TOR.

Stakenet have 2 plans to ensure liquidity first up is the DEX Aggregator which will provide portals into other DEXs to ensure the best liquidity and rates can be found in one place.

The second which I believe is the killer feature is that due to the nature of their wallet and the Lightning Swap tech they have also built in Cross-Chain payment tech. What this means is that any asset they support can be used as payment for another asset. So for example if a retailer accepts BTC then you can pay that retailer in any asset supported by their Multi-Currency Lightning Wallet and during payment the asset will be instantly converted to BTC for the retailer. This suddenly gives all these assets a great new use case of being used as payments at an ever growing list of retailers worldwide and which project wouldn't want that. As such Stakenet are forming partnerships with assets that they list so that those projects nudge their communities to use Stakenets DEX over any other exchange out there which will provide the liquidity needed for the instant cross-chain swaps.

With Stakenet DEX there is no KYC, no accounts, no geo-blocking, no waiting for deposits, no withdrawal limits, no converting assets into arbitrary tokens, no problems. Just straight P2P trading, instantly without the hassle. They are also working on something they are calling Cold Exchanging, which is trading directly from hardware devices like Trezor and Ledger.

When presented with that why would you use anything else?

Stakenet DEX is just one area they are working on, though it is also near release hence the focus on it but it's defs worth checking out the other stuff they have going on too.

[86B]

Yankeeruinx

Sounds like XSN is not only ripping off Blocknet, but are also trying to reinvent the wheel for whatever reason and are subsequently wasting time doing so.

There are already plenty of projects doing these things, Blocknet to name one.


Liquidity Strategies for DXs are quite simple:  start providing liquidity.  It's unbelievably simple to make and use market making bots for DXs too, for example: https://github.com/blocknetdx/dxmakerbot

However at the end of the day, unless people finally commit to using DXs and start actively trading on them, we'll continue to have these chicken and egg liquidity discussions.

[Yankeeruinx]

Yankeeruinx

Sounds like XSN is not only ripping off Blocknet, but are also trying to reinvent the wheel for whatever reason and are subsequently wasting time doing so.

There are already plenty of projects doing these things, Blocknet to name one.


Liquidity Strategies for DXs are quite simple:  start providing liquidity.  It's unbelievably simple to make and use market making bots for DXs too, for example: https://github.com/blocknetdx/dxmakerbot

However at the end of the day, unless people finally commit to using DXs and start actively trading on them, we'll continue to have these chicken and egg liquidity discussions.

Blocknet have a very different approach in execution. Last I checked you had to download all the blockchains for any assets you wanted to trade on their Multicurrency wallet, this is not the case with Stakenet as their MN network hold all the various blockchains so you don't need to. This keeps the wallet clients very lightweight and fast, also means it can be ported to any device like mobile for example.

Also don't Blocknet use Atomic Swaps? If so then XSN's Lightning Swaps are superior as they are offchain over Lightning Network it means they are instant, can be done for little to no fee and theoretically infinitely scalable.

[enhu]

The part I is interesting, and I am waiting for the part II. However, to increase liquidity, I think that key thing should be considered is how to attract crypto enthusiasts to DEXes. By now, they tend to prefer centralized exchanges, rather than DEXes. They have some reasons to think that centralized exchanges can give them better experience, better security, and better supports. Furthermore, fees on DEXes usually high if traders don't own coins of DEXes. such as for dex run on Bitshares network, fees of withdrawals will be cheaper if traders own Bitshares and pay their fees via Bitshares. I meant, building up DEXes more attractive, cheaper fees will help them increase liquidity indirectly for the long run.

That is exactly what weidex has. AS far as I know they do have their own coin WDX which is same tokon for its transaction fee on the exchange. But I'm not sure if it will really attract traders to stick in the weidex exchange. Increasing liquidity is always an obstruction to the progress of every DEX. Bitshares is one of the oldest DEX I've used but its not as friendly as it looks and up to these days its volume still is less than a Million USD. 

[86B]

Blocknet have a very different approach in execution. Last I checked you had to download all the blockchains for any assets you wanted to trade on their Multicurrency wallet, this is not the case with Stakenet as their MN network hold all the various blockchains so you don't need to. This keeps the wallet clients very lightweight and fast, also means it can be ported to any device like mobile for example.

Also don't Blocknet use Atomic Swaps? If so then XSN's Lightning Swaps are superior as they are offchain over Lightning Network it means they are instant, can be done for little to no fee and theoretically infinitely scalable.

Full node trading maximizes security and eliminates risk as you are confirming utxos, raw transactions, etc involved in trades directly on your own fully synced node.

>Multicurrency Wallet

Where is this wallet?  I can't find it anywhere.  Regardless of such this is already capable on Blocknet - there is a group right now utilizing its XRouter technology that have built a working prototype which will be finished soon.  However, anyone is free to make their own - the Service Nodes on the network are running full nodes of blockchains and provide access to all the necessary calls needed in order to create a lite client.  As I hinted at before this is nothing unique for XSN.

>Atomic Swaps

Yes Blocknet utilizes Atomic Swaps and has a current working product you can download and use: https://blocknet.co/#downloads  I can't seem to find XSN's DX... is it working yet?

>Lightning Swaps

If correctly written, these are also atomic swaps.  The difference here is one is on the LN and the other isn't.  Lightning is all based on channels.  "Superior" is highly subjective - there are many limitations and added risks when dealing with channels because within the channel the activity isn't recorded to the chain... only once the channel is closed does a transaction post to the respective chain.  The way the channels are interconnected also poses issues for traders which can rack up fees considerably as your transactions tries to find the best route, so they're definitely not always cheap or fee-less!  Channels can also become centralized based on how the network is currently designed, which makes them targets for foul play.  I'm not saying it's bad to support LN - it's actually good practice to support as many features as possible, but in lightning's case users should be aware of the risks involved as its security guarantee as far as trading is concerned can't be compared to a pure CLTV swap that records to the respective chains during and after the exchange.

[motienvolam]

That is exactly what weidex has. AS far as I know they do have their own coin WDX which is same tokon for its transaction fee on the exchange. But I'm not sure if it will really attract traders to stick in the weidex exchange. Increasing liquidity is always an obstruction to the progress of every DEX. Bitshares is one of the oldest DEX I've used but its not as friendly as it looks and up to these days its volume still is less than a Million USD. 

Loads of decentralized exchanges built on Bitshares platform, but most of them have nearly same core issues. They are not issues of only Bitshares-based decentralized exchanges, but also are common issues of DEXes. I can not imagine how DEXes will change their approaches to provide support for their users when private key backups lost. I guess it is possible, because if there are support teams, whom are responsible to solve issues with sticker orders; they should be able to solve tickets on private key lost. It is likely related to technical limitations of DEXes, at the moment.

[Yankeeruinx]

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And this is where they differ. Stakenet doesn’t require people to download full chains for maximum security because of how the Multicurrency Light Wallet works, when you start the wallet it syncs to the MN network which is hosting the various blockchains. You can take part in the beta when we add more people to it if you are interested. I have been using it for a while now and it works great so far and the one click TOR privacy setting we added 2 weeks ago is really nice. It seems Xrouter idea is similar but if it is still reliant on Atomic Swaps I don’t think it will be viable to the larger audience and if it’s still in prototype stage then they are somewhat behind as XSN’s is pretty much ready for launch just doing final bug squashing and cleaning up UX.

Onchain Atomic Swaps will never gain traction due to their limitations like respective blockchain confirmation times and fees, it’s not a viable option for adoption. If it was so brilliant then everyone would already be using Blocknets DEX and wouldn’t struggle for liquidity. This is why XSN uses Lightning Network to complete their swaps.

I wouldn’t base your assumptions of Lightning Network based on what’s currently available on BTC/LTC and others as the XSN dev team are far beyond that and have fixed many of the issues Lightning Labs and others have been struggling with. There is a reason why the XSN dev team were the ones that updated LTC’s core for them to bring it up to speed with the latest standards:

https://litecoin-foundation.org/lightning-network-collaboration-with-x-9-developers/

[hanniabu]

It seems Xrouter idea is similar but if it is still reliant on Atomic Swaps I don’t think it will be viable to the larger audience

XRouter is not reliant on atomic swaps, it's a blockchain router and separate from XBridge, which is the exchange component of the protocol.

Onchain Atomic Swaps will never gain traction due to their limitations like respective blockchain confirmation times

With Blocknet's DEX, the trade time is independent from the confirmation times. In other words, an LTC transaction and a BLOCK or DGB transaction all complete in anywhere from 5-15 seconds.

This is why XSN uses Lightning Network to complete their swaps.

Lightning network requires collateral lockup and also for long period of times to trade, I believe it was 48 hours the last time I checked. Not sure if you're trolling or you just don't know what you're talking about.

[Kryptic123]

DEXes are indeed the future as they are safe and secure to use.  But liquidity is the main issue that these DEXes are facing. Even the hyped Binance DEX is facing liquidity issues. Doing promotional and marketing events will help to attract more volume I believe.

[motienvolam]

Besides security and customer support to get private keys back for users, DEXes should have passive income for their customers, whom own exchanges' coins and use them to support DEXes. This approach, like some of DEXes applied, will help to increase total liquidity significantly. However, such thing on liquidity can not be reached in short time, because users have to be convinced that DEXes they use are reliable enough to store their coins directly on DEXes platforms, in order to get passive income. It is always risky to store coins on exchanges, and higher risks if they are DEXes.

[Ucy]

Stakenet (XSN) are aiming to fix these issues with their upcoming DEX which utilises Lightning Network and their one click Lightning Swap solution.

The DEX will run straight from their Multi-Currency Lightning Wallet so no need to move your assets anywhere and the entire DEX is hosted on their Masternode Network. All trading fees earned by the DEX are paid back to the Masternode owners running the DEX too. Their Lightning Swap tech means trades are instant so will have the speed of a CEX while ensuring the security of a DEX, they also have built in privacy options like TOR.

Stakenet have 2 plans to ensure liquidity first up is the DEX Aggregator which will provide portals into other DEXs to ensure the best liquidity and rates can be found in one place.

The second which I believe is the killer feature is that due to the nature of their wallet and the Lightning Swap tech they have also built in Cross-Chain payment tech. What this means is that any asset they support can be used as payment for another asset. So for example if a retailer accepts BTC then you can pay that retailer in any asset supported by their Multi-Currency Lightning Wallet and during payment the asset will be instantly converted to BTC for the retailer. This suddenly gives all these assets a great new use case of being used as payments at an ever growing list of retailers worldwide and which project wouldn't want that. As such Stakenet are forming partnerships with assets that they list so that those projects nudge their communities to use Stakenets DEX over any other exchange out there which will provide the liquidity needed for the instant cross-chain swaps.

With Stakenet DEX there is no KYC, no accounts, no geo-blocking, no waiting for deposits, no withdrawal limits, no converting assets into arbitrary tokens, no problems. Just straight P2P trading, instantly without the hassle. They are also working on something they are calling Cold Exchanging, which is trading directly from hardware devices like Trezor and Ledger.

When presented with that why would you use anything else?

Stakenet DEX is just one area they are working on, though it is also near release hence the focus on it but it's defs worth checking out the other stuff they have going on too.

Fee is another big problem aside liquidity. Has the Stakenet able to solve this?
I believe blockchain interoperability will make will make decentralized exchange as as fast and easy to use as Centralized exchange.  This is one of the goals of lightening Network.

When this becomes ready, it will be possible to trade cryptocurrency without leaving your wallet while another blockchain or platform provides all the liquidity with cheap fees

[motienvolam]

Fee is another big problem aside liquidity. Has the Stakenet able to solve this?

Yes, there are issues with fees on DEXes, which require fees for both order cancels, and withdrawals. To have cheaper fees on DEXes, you should buy coins of exchanges, because with the same orders or withdrawals, fees will become much cheaper if you pay them via exchanges' coins, rather than pay fees via bitcoin, or other altcoins. Personally, I always own a small amount of DEXes coins in order to minimize fees. I think that we don't have to own too much exchanges' coins, just enough to pay fees, and when prices dumped, buy a little coins to store for later use.

[weidex]

Fee is another big problem aside liquidity. Has the Stakenet able to solve this?

Yes, there are issues with fees on DEXes, which require fees for both order cancels, and withdrawals. To have cheaper fees on DEXes, you should buy coins of exchanges, because with the same orders or withdrawals, fees will become much cheaper if you pay them via exchanges' coins, rather than pay fees via bitcoin, or other altcoins. Personally, I always own a small amount of DEXes coins in order to minimize fees. I think that we don't have to own too much exchanges' coins, just enough to pay fees, and when prices dumped, buy a little coins to store for later use.

On our exchange platform https://weidex.market/ we don't have deposit/withdraws and also listing fees. In fact with the new update to our platform Makers will receive 50% of the Takers fee for providing liquidity

[weidex]

The part I is interesting, and I am waiting for the part II. However, to increase liquidity, I think that key thing should be considered is how to attract crypto enthusiasts to DEXes. By now, they tend to prefer centralized exchanges, rather than DEXes. They have some reasons to think that centralized exchanges can give them better experience, better security, and better supports. Furthermore, fees on DEXes usually high if traders don't own coins of DEXes. such as for dex run on Bitshares network, fees of withdrawals will be cheaper if traders own Bitshares and pay their fees via Bitshares. I meant, building up DEXes more attractive, cheaper fees will help them increase liquidity indirectly for the long run.

Here is the second part:
https://medium.com/@titotitov/liquidity-strategies-for-decentralized-exchanges-part-ii-1947d3e61566

I think that DEXes need more liquidity and faster trade execution, then we will have more traders...

[weidex]

DEXes are indeed the future as they are safe and secure to use.  But liquidity is the main issue that these DEXes are facing. Even the hyped Binance DEX is facing liquidity issues. Doing promotional and marketing events will help to attract more volume I believe.

We agree with you.
Now we have great liquidity providers like uniswap and kyber which should be the initial solution for the liquidity issues.

[MonsterV]

The part I is interesting, and I am waiting for the part II. However, to increase liquidity, I think that key thing should be considered is how to attract crypto enthusiasts to DEXes. By now, they tend to prefer centralized exchanges, rather than DEXes. They have some reasons to think that centralized exchanges can give them better experience, better security, and better supports. Furthermore, fees on DEXes usually high if traders don't own coins of DEXes. such as for dex run on Bitshares network, fees of withdrawals will be cheaper if traders own Bitshares and pay their fees via Bitshares. I meant, building up DEXes more attractive, cheaper fees will help them increase liquidity indirectly for the long run.

really, the level of investor and trader confidence is now beginning to shift to centralized exchange. Maybe only a small percentage of them use DEXes. Especially in terms of user experience, centralized exchanges are far superior to DEXes. Moreover, in DEXes there is often mass dumping, and the average coin here is shitcoin.

[qazgroup]

Yeah this is one of the most critical issue being faced by not only the dexes but a lot of centralized exchanges as well that is why they are using bots and other unethical tools to show fake volumes and liquidity on their platforms, i think the only way to naturally increase volume and liquidity on an exchange by providing quality and friendly platform with high speed transactions, low fee and fast customer care services, investors have a lot of choices now so the exchanges need to up their game to attract investors.