Cryptocurrency exchanges are key pillars of the blockchain ecosystem as they facilitate a seamless exchange of value over decentralised networks. Initially, centralised exchanges (CEX) provided the much-needed access to cryptocurrencies and continue to play a critical role in their mainstream adoption. Their core infrastructure, innovation, and seamless user experiences have all facilitated crypto adoption. CEX have their fair share of challenges. Hacking, propagating fraud, and run-ins with authorities due to their centralised control.
Consequently, DEXes have come to the fore to remedy these shortcomings whilst also being better alternatives that are censorship-resistant, less prone to hacking, and less susceptible to government intervention. As such, DEXes have become the cornerstone of DeFi; providing easy, efficient, and secure access to liquidity, digital asset ownership, and passive income. Notwithstanding, DEXes are faced with multiple problems that adversely affect their operations.
Current challenges DEXes face
DEXes usually charge the users fees that are higher than the industry standard. This is because they need to attract liquidity providers on their platform by incentivising them with a proportion of the fees generated on the platform. For instance, the popular DEX, Uniswap charges 0.30% flat fee per trade which is higher than the industry standard of 0.25%. This can be quite costly considering the vast number of trades users conduct on these platforms. On top of this, users are then charged again for their withdrawals, cumulating very high fees.
Single chain support
Most DEXes are built as layer 2 applications on top of a specific blockchain infrastructure. As such, they can only provide users access to the DeFi products and services also built on that specific protocol. For instance, UniSwap users can only access Ethereum-based tokens while Binance DEX users only have access to those on the Binance Smart Chain. The single-chain support problem is a major issue as it limits users’ ability to seamlessly participate in the DeFi ecosystem and leverage the various benefits observed on multiple networks.
Lack of efficient market-making mechanisms
The DeFi ecosystem has grown rapidly, evidenced by an increased number of DEXes as well as new crypto tokens. This explosive growth has not been met with a corresponding amount of new market-making tools with matching capabilities. This problem is propagated by the increasing technical complexity and lack of standardization for blockchain protocols. These inefficiencies make it difficult to develop automated market-making tools. Subsequently, resulting in liquidity fragmentation and inadequacy across various DEXes and DeFi assets.
Have subpar UI/UX
The success of CEX is largely attributable to their great user experience since they are easy to use with highly interactive and responsive interfaces. CEX are also designed to minimise the technicalities of blockchain technology on the user’s end. The same cannot be said of DEXes though as most are poorly designed with non-responsive and unappealing interfaces. Some DEXes are also quite technical requiring users to have the programming knowledge to conduct any transaction. This limits user activity on DEXes and could be a hindrance to mainstream crypto adoption.
Mandatory cost of gas
Since DEXes are built on top of existing networks, users are required to pay gas fees for all transactions on the protocol. This has been a major issue over on the Ethereum blockchain in the past few months as gas fees skyrocketed due to increased activity on the network.
According to Etherscan data, Uniswap traders paid a total of 10,805 ETH ($5 million) in transaction fees for $1 billion trade volume in one day on 2 Sep. SushiSwap shot to the third position on the Ethereum gas fees chart, within just 5 days of its launch, thanks to heightened activity on the DEX.
These high fees could become a major impediment for the growth of DeFi as they limit the network’s scalability with additional use.
These issues have made the DeFi ecosystem less desirable thus slowing down its expansion. ZeroSwap is developing tools that can overcome these obstacles and make the DEX experience more desirable.
The ZeroSwap solution
ZeroSwap is a multi-chain protocol that powers DeFi with zero fees and transaction fee mining. The platform has multi-functionalities ideally suited to the needs of the DeFi ecosystem. It supports liquidity mining, DeFi token offering, DEX aggregation, and has a market-making suite available for its users. Currently, the ZeroSwap protocol is being developed on the Ethereum blockchain and Binance Smart Chain, with other networks to follow soon.
ZeroSwap is built with a focus on solving these issues and providing users with a highly desirable platform for participating in the DeFi ecosystem. Its multi-chain capability enables users to access multiple decentralised assets on various blockchain protocols. The feature also allows users to make on-chain trades at the best rates for profit maximisation.
The ZeroSwap platform also has a novel solution to address both the high network and exchange fees charged for DeFi trades. Users will be able to make feeless trades and gasless transactions on ZeroSwap. Moreover, the platform will reward users with its native ZEE tokens for liquidity mining with a percentage of the rewards burnt to make trades self-sufficient. This is deemed important to empower liquidity miners and traders while at the same time enabling efficient markets.
The ZeroSwap market-making suite will enable the ubiquitous development of trading tools via the platforms software development kit (SDK). The suite will truly empower on-chain trading as users will be able to craft strategies based on reliable market-based information.
In an effort to make DeFi trading more pleasant, ZeroSwap is building an aesthetically appealing user interface that is easily navigable with a simplistic design. Underneath the platform is a robust architecture that is purposely built to minimise technical complexity on the users’ end. This is aimed at improving the user experience by creating a seamless interaction within the DeFi ecosystem.