What Kind of DEX Does CoinEx Want to Develop?

DEX is short for Decentralized Exchange. The decentralized exchange, as people call it, is relative to the centralized exchange. At present, almost all blockchain exchanges are centralized, which is believed to be the biggest bug in this field. Blockchains are known for decentralization, but the entire ecosystem is heavily dependent on centralized exchanges. There is no essential difference between the operation of a centralized exchange and that of a traditional bank or broker. Users register with their real names and deposit assets to be traded on the platform, which requires full trust in the trading platform.

After more than two years in operating the centralized exchange, we are quite aware of the difficulties facing centralized exchanges.

First, the serious security issue. Centralized exchanges are faced with serious security issues, the most important of which is user asset security. Due to the anonymous and irreversible nature of blockchains, digital assets are difficult to recover once they are stolen. Users’ digital assets are hosted on the platform, and the huge digital assets that are centrally maintained by the platform have become the target of all hackers. Thefts take place frequently in exchanges, and the most famous is the one that led the largest bitcoin exchange, Mt.Gox, to bankruptcy. According to public statistics, the stolen assets of all exchanges have totaled more than $2 billion since 2018. This does not include many unpublished incidents. Almost all well-known exchanges have been stolen, in various ways. Any bug can be fatal.

Second, the high management costs. Each digital asset issued on the centralized exchange comes with high management costs. Everything ranging from the previous project docking review and technical support to the subsequent hot and cold wallet management, node maintenance and upgrade, etc., is very complicated. Because of the severe security issue of digital assets, a lot of work can only be done by the core team or even the CEO. This greatly limits the number of tokens that the exchange can support. A few hundred tokens could be the limit. With the development of the blockchain industry, increasing digital assets are issued, heralding a spurt in the future, which centralized exchanges would be incapable of handling.

Furthermore, the tough regulatory environment. The blockchain is an unprecedentedly free and open financial instrument. Governments around the world are exploring how to supervise it. Centralized exchanges are the focus of regulation. The characteristics of the blockchain make itself prone to abuse by criminals such as pyramid schemes, fraud, money laundering, etc. The exchange has become an accomplice, as is the case with the “model tokens”(tokens that start with a low market price and then suddenly plunge after a sharp rise in price because of some misleading marketing schemes) that have recently become popular in the industry. In addition, blockchain projects are generally still on their early stage, and risks could be high. Over 95% of Internet-related start-ups have ended up in failure, and the figure is even higher in the blockchain industry. Most of the tokens will eventually be in vain. Blockchain projects usually attract immature investors, which can easily lead to mass protests, and exchanges are often the first to bear the brunt.

DEX is clearly the evolutionary direction of the blockchain exchange, and DEX will reshape the exchange through decentralization. In DEX, users are in charge of their own private key, without the need for centralized asset custody. That smoothly solves the trust and security issues resulting from centralization. DEX can support the issuance and trading of thousands or even more tokens to meet the needs of future industry development. Through decentralized governance and operation, DEX has no single point of failure and takes on more vitality.

The entire industry has also made a lot of explorations in the direction of DEX, and there have been many solutions to decentralized exchanges. Yet problems still exist, more or less, and, in my point of view, many of such exchanges still operate in a centralized way, not in a true sense of DEX. For example, some DEXs still make a match off the chain for the sake of efficiency. Among them is Binance, whose nodes are not open, and the issuance of tokens still needs to be reviewed. In addition, most DEX solutions rely on smart contracts in the public chain, which is subject to the processing ability of the smart contract itself. Most public chains of smart contracts can handle only dozens of transactions per second, and are open to all applications. This is definitely not enough to meet the needs of large-scale transactions or to achieve better user experience.

We urgently need a real DEX. A true DEX requires full open source and full community governance, without depending on official nodes, websites, wallets, etc. A real DEX requires completely free issuance and launch of tokens and free trading without permission. Besides, high performance is required to meet large-scale and high-frequency trading needs.

I was once not optimistic about DEX because of its high learning threshold and poor user experience. However, with my horizon broadened, I firmly believe that the future of the blockchain exchange lies in DEX. Looking back into the difficulties our team has encountered in the past two years, in particular, I vowed, in the bottom of my heart, to set up an exchange that would never be closed, a real decentralized exchange. And now we have CoinEx DEX, which is committed to being a truly decentralized exchange that can be used on a large scale. To set up a true DEX, we need to create a public chain, and that’s how CoinEx Chain was born.

Honestly, this is a very difficult task. Fortunately, Jiang Jiazhi, a well-known blockchain developer and former head of the Copernicus team in Bitmain, happened to have the same view with me. He devoted himself and his team to the development of CoinEx Chain and achieved what I aspired to in an efficient way. For the time being, the recently launched beta network has entered the final stage of development and testing, and will soon be put on the main network. There would be no CoinEx DEX without him.

The first thing CoinEx DEX is working on is the governance of the decentralized community.

CoinEx DEX is based on CoinEx Chain, the governance mechanism of which is designed by means of a public chain. First, we chose the PoS based on Byzantine protocol as the consensus protocol of CoinEx Chain. That is because PoS has superiority in community governance. The proposal and node voting mechanism can make quick and effective decisions on the chain. Second, PoS can make blocks faster, which is very important for trading scenarios. At present, it costs the CoinEx DEX test network about 2~3 seconds to generate a block, approximately real-time. Finally, I believe PoS is superior to PoW in terms of decentralization, security, cost, governance, etc. It is unnecessary to go into details here, and I will talk about it later if I get the opportunity.

After studying a lot of public chain solutions, we decided to build CoinEx Chain on the Tendermint protocol and Cosmos SDK. Cosmos is arguably the best PoS solution to date, with an ideal framework. Development based on Cosmos development is like standing on the shoulders of our predecessors, and thus, can meet our needs more efficiently. In addition, the Tendermint protocol ensures that there will be no block reorganization, which fits the needs of DEX exactly. That is a very big improvement over Bitcoin or Ethereum. In other words, once confirmed, the transaction will not be rolled back.

CoinEx Chain has set up 42 nodes at most for generating blocks . The more such nodes, the more decentralized the network is. Yet it’s not “the-more-the-better” case, since more nodes will increase the block time at the cost of some transaction performance. So we make a compromise between decentralization and performance. In addition, the number 42 remains “geek”. In the science fiction The Hitchhiker’s Guide to the Galaxy, 42 is “the ultimate answer to life, the universe and everything.” In order to truly achieve decentralization, CoinEx DEX will not form an official node, and all nodes will be composed of third parties. We hope that major players in the industry will participate in the CoinEx DEX node to build the community and ecosystem of CoinEx DEX. We will also launch a series of support programs. The specific rules will be announced in October.

In addition, open source is also important to the decentralization of CoinEx DEX. We will fully open up codes related to CoinEx DEX, including CoinEx Chain, the wallet, the explorer, etc., in the future when necessary, and develop and release the codes in the form of free software. The entrance to CoinEx DEX will also be diverse. In addition to the official wallet, we will connect to more third-party portals, such as wallets, market applications, exchanges, etc., and truly decentralize the user portal.

What CoinEx DEX is working on is to realize the license-free distribution and trading of tokens.

CoinEx DEX is an exchange where everyone can issue tokens and a one-stop solution for token issuance, storage and transactions. CoinEx DEX can be seen as an upgraded version of Ethereum. The vast majority of Ethereum’s needs come from the issuance of standardized tokens, but the transaction still needs the support of centralized exchanges. Unlike Ethereum, CoinEx DEX satisfies demands for the issuance and trading of token at the same time.

No need for a license is the most important guarantee for decentralization of CoinEx DEX. Reviewing the launch of tokens is a centralized approach and is highly subjective, which may hinder some innovative applications and can’t really block junk projects. In the future, CoinEx DEX may have thousands or even more tokens circulating on it, and it is impossible to effectively review such a large number of projects. The licensing mechanism, which does not require a license, will screen out really good projects through the market mechanism.

It is very simple to issue tokens at CoinEx DEX. You don’t need to write a smart contract. Just fill in some parameters, and create a trading market for that token. Besides those standardized tokens with a fixed total amount, we support more application scenarios by means of options, such as whether to allow the burning, additional issuance and freezing of the token, and the freezing of address. To protect the interests of investors, these options can only be made at the time of issuance and cannot be changed afterwards.

In addition to the issuance of a new token on CoinEx DEX, it is also possible to map assets from other chains or real-world assets in the form of gateways. CoinEx will also issue stablecoins of mainstream digital tokens such as BTC, BCH, ETH and USDT after CoinEx DEX goes online. In the future, more and more institutions will issue other stablecoins on CoinEx DEX. The project team can open trading pairs of your own token and these stablecoins, to achieve the flow of value.

Liquidity is also important. On the one hand, we will provide SDKs for quantitative traders to automate transactions and offer liquidity; on the other hand, CoinEx DEX has built-in automated market making agreements such as Bancor, which is similar to the memory trading on EOS. Through the Bancor agreement, users are not trading in the secondary market, but directly with smart contracts, which makes it simple to provide ample liquidity for early projects.

What CoinEx DEX is finally working on is the performance and user experience of decentralized exchanges.

Performance is crucial At present, both Bitcoin and Ethereum have their development severely restricted by performance, as is the case for decentralized exchanges. For better performance, we gave up the smart contract solution. Instead, we followed the concept of chips of a dedicated mining machine, and built CoinEx Chain into a special public chain, specially built for DEX. Smart contracts are similar to general-purpose chips and have abundant features. Yet its performance remains a problem. The dedicated public chain is similar to a dedicated chip, not versatile but effective. CoinEx Chain currently can deal with more than 2,000 transactions per second on the test network, more than one hundred times faster than Ethereum. Still with large space for improvement, the final efficiency could be over 10,000 transactions per second.

Good user experience can lower the threshold for participation. DEX does have a higher threshold than centralized exchanges. Users need to understand more concepts, but this can be optimized in various ways to improve the user experience and lower the threshold. CoinEx DEX is designed to reduce the concepts that users need to learn. EOS’s concepts such as RAM and CPU are definitely counterexamples in this respect. In addition, the CoinEx team has undergone a lot in improving user experience, and we are confident to create an easy-to-use product.

Security remains important. Decentralized wallets circumvent the security issues from centralized custody, but many new users are still likely to lose their assets due to their ignorance of the concept of private keys. In this regard, we can learn from the design of password managers such as LastPass to lower the threshold for users and enhance their experience without compromising on security.

DEX is not to replace a centralized exchange; instead, they coexist and are interdependent on each other.

CoinEx DEX is not designed to replace a centralized exchange; nor is it committed to solving cross-chain trading problems. We believe that the centralized exchange will remain the best solution for cross-chain trading in the future. DEX is more for the issuance and trading of tokens. In addition, centralized exchanges can support products such as more complex derivatives transactions, and are more understandable and user-friendly.

DEX needs to rely on a centralized exchange to develop in the early days. However, without solutions to the three major problems, respectively security, management and supervision, centralized exchanges have very obvious ceilings. Yet DEX completely solves these problems, and thus have more room for future development. So I think DEX is quite promising.

If you would like to participate in building the next generation of blockchain exchanges and CoinEx DEX nodes, please feel free to contact us.

Related posts:

Types of Content That Naturally Attract. “Types of Content That Naturally Attract” is published by FanGrow.com App.

Diaetolin capsules are a premium dietary supplement for fat burning. By suppressing your hunger as well as slowing down fat storage in your body, Diaetolin can aid you shed the extra pounds you…

Even if you are not a great cook this is a great thing to do. It helps you keep track of time (set an internal clock) and you will find that it will take a good amount of time out of your day…