PLUGChain: The future needs of DEX and support of different chains
Lately, DeFi has gone mainstream with the recent increase in adoption and more institutional players’ entry into the DeFi space. At the core of decentralized finance lies Decentralized exchanges (DEXs). Decentralized exchanges are platforms where users can exchange their digital assets and also fulfill key DeFi functions such as staking, liquidity mining, and others. Popular decentralized exchanges include Uniswap, Sushiswap, Raydium, 1Inch, SerumDex, and others.
Although decentralized exchanges have been pivotal to DeFi growth, there are still a lot of improvements needed to take DeFi to the next level.
With various issues ranging from copyright, transparency, and front-running of trades and others, there are various uprising needs for decentralized exchanges that can supersede the current trading platforms in traditional finance.
Some of the needs are discussed below:
- Security: Although decentralized exchanges are considered safer than centralized exchanges, DEXs can be exploited using minor lapses in security. In April 2020, Bisq, a decentralized Bitcoin exchange was hacked by exploiting the vulnerability in the trading protocol of the exchange. About 3 BTC and 400 XMR were stolen by the hacker(s). Also, various DEXs users are at risk of phishing attacks and vulnerable to protocols they interact with using the platform. There is an uprising need for decentralized exchanges and Defi protocols to be more secured to protect the funds in the wallets of their users. Some of the various ways DEXs can be secured against cyberattacks include regular security audit and penetration testing, buy bounty programs for rewarding ethical hackers, and use of Secure Socket Layer(SSL) /Transport Layer Security (TLS) protocols.
2. Liquidity: All exchanges, regardless of their nature require liquidity for users to complete trades. However, the liquidity on decentralized exchanges is a tiny fraction compared to those on centralized exchanges. Centralized exchanges like Binance, FTX, and others have deeper liquidity for completing users’ trades. Decentralized exchanges need to employ more liquidity and slippage reduction approaches to bridge the liquidity gap between them and their counterparts to bring more users aboard.
3. Multi-Chain support: Most DEXs support only one blockchain, i.e the blockchain they are built on. Uniswap and Sushiswap support the Ethereum chain while SerumDex and RayDium support Solana blockchain. With the rise of more DeFi tokens and blockchains, there is an uprising need for DEXs to support multiple chains and allow token swaps on various chains. Plugchain, a layer 0 blockchain, allows cross chains swapping with low gas fees and can handle 50000 transactions per second.