What does TON’s DEX need compared to Ethereum and Solana?

Author: Wyz_Research

Transactions are the absolute core of the Crypto world, but in the eyes of different practitioners, the channels for completing transactions are very different.

In centralized exchanges, almost all the transaction liquidity of the entire industry is carried. The platform has high matching efficiency, good transaction depth, and fast transaction speed under the centralized model.

But for the native world of public chains, decentralized exchanges based on smart contracts are the core of the entire chain transaction and the liquidity core of the chain business. The listing and trading rules of decentralized exchanges are the same as those of public chains. The trading characteristics of permissionless transactions are maintained, which forms a distinct "threshold" difference with centralized exchanges.

If you look at each public chain alone, there will be a core decentralized exchange to activate the business and ecology of the entire chain. We have even seen the "full chain of token business" built around DEX on Ethereum and Solana.

During this cycle, the TON public chain has gained fame, but the ecological construction of TON is still in its early stages. The DEX applications on the TON public chain are overall "few and single-function". Compared with the mature Ethereum and Solana, how do the DEX applications on TON need to develop?

Mature DEX on Ethereum and Solana

There is no doubt that Ethereum and Solana are the most mature DEXs at present.

Ethereum's DEX benefits from the long-term development of Ethereum Defi, while Solana's DEX development benefits from the performance and ecological popularity of the chain. Its DEX transaction volume once reached a situation of competing with CEX.

Next, let's take a look at the development of DEX on the two chains respectively.

The earliest DEX of Ethereum is Uniswap, which pioneered the AMM model, using a token pool with equal proportions as the liquidity supply for two tokens in the transaction pair. In the iteration of Uniswap applications, V1 is the simplest AMM version, V2 optimizes functions such as transaction matching and LP, and V3 adds the function of providing liquidity in a fixed price range, starting to provide friendly support for professional liquidity providers, which is also the current running version. In addition, V4 with functions such as limit orders is also being implemented.

From the changes in iterative versions, Uniswap, on the basis of ensuring smooth user transactions, continuously upgrades LPs that provide liquidity and provides more mature asset management functions. This represents the optimization direction of DEX.

In addition to swap and AMM LPs, Uniswap has also achieved good results in DEX business.

First is MEV. The price of the AMM pool changes with the proportion of tokens in the pool during user transactions. At this time, MEV will exist because of the arbitrage space generated during the AMM pool transaction matching process, and the token transaction price will also affect the price reading of other applications on the chain.

Therefore, Uniswap also has a natural advantage in MEV and Oracle.

On MEV, Uniswap maintains a certain resistance to MEV, and guards against sandwich attacks caused by MEV and higher transaction slippage in addition to impermanent loss.

On Oracle, DEX is almost the fastest price source for trading pairs and the most complete source of trading pair data, which makes many DeFi protocols not choose Chainlink and other Ethereum off-chain oracle solutions but choose Uniswap-based DEX oracle direct quotation solutions. This allows DEX to use the "oracle" capability as one of the output capabilities to form other DeFi data modules (such as lending protocols and derivatives trading markets).

Uniswap represents DEX, but the refined functions required by DEX business are supplemented by other DEX. There are many types of DEX on Ethereum, such as Balancer, Curve, Sushiswap, which have been developed for many years, and aggregator DEX such as 1inch, MetaMaskswap, Matcha, etc.

Among them, the emergence of Balancer has begun to make DEX more refined as the liquidity center of on-chain applications. First of all, Balancer proposed the management of liquidity supply: liquidity pools with different weights and multiple tokens. It boldly changed Uniswap's equal-proportion liquidity pool to a custom ratio and multiple tokens, which is conducive to the project's liquidity supply and market value management. Furthermore, Balancer also changed the rush purchase rules of Launchpad to LBP rules that are more conducive to users obtaining reasonable token prices, changing the impact of AMM pool preemptive scientists on transaction prices;

The existence of Curve mainly presents us with a market for on-chain stablecoin transactions, which mainly provides transaction liquidity for various stablecoins and pTokens. Stablecoins and pTokens are actually transit objects in the DeFi transaction process and are necessary for transactions and business realization on the public chain. In the economic mechanism of tokens, some of them also play a buffering role.

Looking at DEXs such as Balancer, Curve, Sushiswap, and DODO, in addition to trading and exchange, another important business is to provide pledge pools for a variety of ️ tokens such as LP and pToken to complete the compounding of assets. These DEXs not only gather the LP liquidity of AMM, but also play the role of supply chain for applications such as Defi.

To sum up, we can clearly see that on Ethereum, a mature chain has been developed based on DEX, but the transaction confirmation speed on Ethereum is slow. When the transaction confirmation is fast enough, or the data feedback on the chain is fast enough, the corresponding business may change to another form of development. For example, Solana.

The biggest difference between DEX on Solana and Ethereum is that the experience is almost the same as CEX, and if the transaction confirmation is fast enough, the role of DEX and aggregator is the same. At this time, DEX cares most about "all on my platform" and cares more about "where are the trading pairs and corresponding LP pools."

So the support for LP will be more refined.

Since Uniwap V3 proposed LP with a fixed price range, all subsequent innovative DEXs have added price management on the basis of LP.

On Solana, the most sophisticated DEX is Jupiter, and the one with the most sophisticated liquidity pool function settings is Meteora. Compared with the two, Meteora's main function is to provide liquidity for the corresponding trading pairs. Its sophisticated settings for LP include not only price ranges, but also token volatility curves and ratios. In addition to the rich LP functions, Jupiter also focuses on token issuance and will be designed for user needs. For example, users can use the dollar cost averaging method (DCA) to buy tokens in batches.

In addition to DEX, almost all wallets on the Solana chain have transaction aggregation functions for on-chain trading pairs. When the transaction confirmation speed is extremely fast, users no longer need to enter the DEX to complete the swap operation.

This reflects the design characteristics of the DEX application of high-speed blockchain: when designing functions, modular openings should be left, and functions can be plug-in combined, so that all users' entrances can quickly integrate DEX trading modules, so that users can use the liquidity on their own DEX when they need to swap.

The current situation of TON's DEX

Ethereum and Solana's DEX are so mature in the cycle, so what is the current situation of TON? How much difference is there, and where is the difference?

TON's performance and pressure-bearing capacity are the only ones that can stand shoulder to shoulder with Solana among all the current public chains, but TON's ecosystem is a combination of Web2 mode and Web3 mode. This combination will technically dilute Web3 in use and deepen Web3 in technology.

DEX in the TON ecosystem has this feature very obvious.

For example, Telegram has built-in centralized trading pools to complete the recharge of stablecoins and TON, and then complete the exchange of TON and other tokens. From a functional point of view, it is already a simplified version, and the operating experience is almost the same as the flash exchange of CEX.

This function is the first function of Telegram's Wallet. The second function is to complete the interaction with the chain through the TON public chain wallet TON Space. The experience is basically the same as using MetaMask on PC and mobile terminals. If you need to exchange tokens, STON and Dedust are more commonly used in the ecosystem, but the functions are basically similar to Uniswap V1.

Obviously, this reflects TON's shortcomings in DEX. If Telegram Wallet undertakes the CEX experience, TON Space and DEX can interact on PC and mobile terminals. Finally, Telegram's Mini App and Bot will also be the trading front end of DEX or CEX functions. These designs meet the optimization of the trading experience, but the native interaction part on the back-end chain is obviously backward.

At present, all DEXs, such as STON and Dedust, only provide trading functions similar to Uniswap V1. In our analysis of the Soalna DEX ecosystem, we see that for DEXs on high-speed blockchains, it is important to provide trading liquidity or modularize trading functions so that the advantage of liquidity becomes the reason for user choice.

For transactions on TON, the front-end entrance must exist in Telegram in large quantities. DEX still needs to increase the refinement of its business like Jupiter and Balancer, and balance all users. Whether it is a user, a token provider, a liquidity provider, or a platform developer, each role needs certain refined functions to cooperate.

What projects on TON are improving DEX?

Compared to DEXs such as Uniswap, Balancer, and Jupiter, TON has not yet appeared (or has not yet been launched) a project that can fully complement all functions, but after reviewing the public project design ideas in the entire ecosystem, the author found that the upcoming DEX on-chain transaction middleware LayerPixel has the potential to complete the TON DEX function supplement.

LayerPixel is incubated by TON public chain's launchpad TonUP. It is a DeFi solution designed for Telegram Mini App, officially called Layer 1.5. It can provide services including wallets and DEX (multiple trading algorithms). In addition to launching PixelSwap directly for the C-end, it also provides other applications with an embedded SDK kit based on Telegram Mini App for developing swap functions.

What TON needs is the existence of corresponding roles in the full-link scenario related to assets. This full link includes asset issuance, asset trading, trading liquidity supply, oracle, asset pool, wallet, etc.

The function of IDO is to issue. There are ordinary snap-up IDO and LBP-style bidding IDO on Ethereum. When snapping up, it is very easy to push up gas and token prices, which can easily cause the price to be artificially high and then plummet after the opening. Therefore, the adoption of LBP, from a mechanism perspective, allows traders to reduce competition and consider buying after the price meets expectations. In the scenario link provided by LayerPixel, TonUP can provide IDO issuance, and it has added LBP rules to the issuance of TON's Launchpad.

After IDO, tokens begin to provide liquidity and combined transactions, and DEX intervention is required at this time.

LayerPixel's Pixelswap is a DEX based on weight pools, which is consistent with the functions of Balancer and supports LBP's asset issuance method. In addition, this type of Dutch auction issuance method is suitable for small and medium-sized projects with low FDV. The most common projects in the Telegram ecosystem are games/GameFi projects of this type.

The more sophisticated the design, the more DEX LP will be like a mature LP in a centralized exchange, which can actively guarantee the yield of funds and isolate risks.

After the token trading on DEX begins, the next will be Oracle, Pool and wallet business.

Oracle is the process of providing price sources from real-time prices in AMM to external DeFi, DEX, aggregators, lending, asset bridges, etc. Based on the rich AMM, it naturally has this ability; Pool is a tool for users to pledge other multi-assets for compound interest. When there are many DeFi on the chain, there will be multiple pTokens. For example, many Ethereum DEXs will provide exchange and pledge for Lido's stETH; finally, the wallet provides a user operation entrance outside of all trading platforms with the support of high-speed blockchain. Through transaction aggregation, Launchpad combination and other parts, all functions can be designed in the wallet and used in combination with other applications.

LayerPixel has designed IDO, token trading, wallet, oracle, Pool and other parts in its business chain. After communicating with its team, it was found that its goal is to make up for the design deficiencies of DEX on TON, and hopes to become TON's DeFi middleware through multiple functions based on LayerPixel.

At present, the news obtained is that the code part of LayerPixel has been developed and submitted to the audit company for audit. For security reasons, the audit is cross-audited by two audit companies, and the main network will be officially launched after the audit results are completed.

Written at the end

After observing the application of TON, it will be found that TON relies heavily on Web2. This design is to lower the threshold for Telegram users, but based on the experience of the development of multiple high-speed public chains, Telegram's official wallet may be more of a wallet verification tool in the future to assist users in more direct on-chain native transactions to ensure the security of assets and the correctness of Web3 interactions.

For public chains, DEX is a place where the vitality of the chain is released. The goal of each DEX is to become a mature financial trading platform, so that users can have accurate and mature asset management capabilities.

TON has been at ATH, and the ecological value is also growing. When TON is developing at its peak, the data performance of the project value will be concentrated on the trading pairs of DEX. For this reason, the more mature the development of DEX, the more likely investors will seize the opportunity.