Polkadex — The trading engine for web3 and Defi

A little bit of history

Ever since the Bitcoin whitepaper was released, it is amusing to note the number of centralized institutions or trusted agents that cropped up around the decentralized idea of open, peer to peer, programmable internet of value. Bitcointalk.org used to be the secret hangout for crypto nerds, some of whose online discourses in the community have left indelible footprints in the evolution of trustless, distributed, peer-peer, consensus mechanism, aka. the blockchain.

Back in 2013, there were specialized and trusted members within the cryptocurrency community that worked as escrow agents in order to complete a transaction in bitcoin. Everyone faced the same problem. There was no way to revoke a transaction. Once sent, it’s gone! So, it was natural that you had to find someone to trust mutually in order to escrow a cryptocurrency transaction. However, it diluted the very essence of Bitcoin’s invention. There had to be a trustless mechanism. Even though the fundamentals of bitcoin’s whitepaper allow trustless communication and transfer of value among participants in a network, its power is still not leveraged into the world of finance that still relies on third-party custodians to represent the participants. Decentralized finance or Defi is at the heart of solving this problem.

Ownership in centralized exchanges comes with great responsibility. In that ownership, these operators have a very privileged position of power. We have seen many cryptocurrency exchanges abusing that power by censoring deposits and withdrawals of legitimate traders, outright fraud, and exit scams, forcing projects to do illicit activities to stay listed, so on and so forth. Even when Centralized Exchanges were getting hacked daily, the ability to transfer assets without a central custodian remained a distant dream until decentralized exchanges announced their arrival.

In traditional decentralized cryptocurrency exchanges, you are stripping out all of these centralized functions and replacing them with smart contracts. So everything is happening on-chain. The token will settle via the smart contracts automatically; it’s a trustless component to trading. It comes with a cost. Traditional decentralized exchanges are not efficient; there is also a transaction fee overhead which is cost-prohibitive to the traders; and, they remained in the shadow, unable to compete on these terms:

1. Liquidity
2. Speed & Transaction throughput
3. Inadequate UI/UX experience
4. Lack of advanced trading features, high-frequency trading, and bots.
5. Custody & Trustless interoperability

Bitshares.org offered great promise but held back by centralized gateways, inflexible interface, and lack of liquidity. Etherdelta swept the market by storm with an innovative way to trade using smart contracts, but it couldn’t scale due to prohibitive gas fees. The era of decentralized exchanges was born, necessitated by a desperate demand for noncustodial transfer. Notwithstanding the overall limitations of these exchanges, many started using them but only to realize neither would they scale, nor would they have the liquidity or full decentralization needed for a fast, secure trading experience.

Perhaps it is the same struggle what the Defi (decentralized finance) industry is going through right now trying to put the pieces together from a technology meant to bridge the trust gap between two blockchains with similar properties engaged in a financial transaction.

Fast forward to 2020, smart contracts have, to a great extent, promised to deliver this dream. It has opened the possibility of controlling the flow of money using programmed preconditions which when leveraged, eliminated this problem to an extent. Projects envisaged under the Ethereum ecosystem, offer quantum leaps into the future. However, due to lack of scalability, chain maximalism, and lack of common protocols, the progress is slow, to say the least.

Enter Substrate, a fully modular way to build application-specific blockchains. It makes it easy to build a composable blockchain that works and behaves just the way you want it and can be connected to the Polkadot network. This made way for an exciting amalgamation of technologies. Thus we created Polkadex, a substrate-based, fully decentralized, peer to peer, AMM supported, order book based exchange. It aims to run as a Polkadot parachain, supporting the growth of the Web 3.0 Defi ecosystem in a scalable, upgradable environment.

Some of the technology innovation it aims for are as follows:

1. Uniquely designed cloud architecture providing a fluid, responsive, realtime trading experience by collecting market data from the Polkadex nodes
2. Interoperability with ERC20 tokens using Snowfork
3. Interoperability with other blockchains using a Parachain slot with Polkadot relayers
4. Users never feel they are on a 3-second block time network
5. Comparable execution speeds with the largest centralized exchanges thanks to the underlying technology of the Polkadot network

What’s in it for the traders?

Polkadex has come up with innovative ways to improve liquidity. Some of the ways it attracts market makers and liquidity providers are as follows,

1. Best in class UI/UX for traders with HFT and advanced trading feature
2. Market makers pay zero trading and network fees
3. Market makers are further incentivized with 0.1% of the trading fees
4. Built-in constant product AMMs on-chain.
5. Easily integrate trading bots and liquidity pools using our blockchain RPC in a trustless manner
6. Non-custodial, users have full control over the assets
7. That means Polkadex do not touch trader’s funds

The User Interface

Given below is a sneak peek into the UI/UX under development.

The codebase is available at the following GitHub repo. The team has recently won a Grant from the web3 foundation and the completed work with an optimized version of the trading engine can be accessed via the following link: https://github.com/Polkadex-Substrate/Polkadex

Testnet launch of the exchange engine is expected by October end or early November 2020

Community

We are building the Polkadex community. You can join via

Telegram: POLKADEX

Email: business@polkadex.trade