I love cryptocurrency, not for it's price, but for the freedom, it offers. Centralized exchanges, do not mix well, with, it's decentralized nature. I was always, a fan of decentralized, exchanges. A post on publish0x, informed me, that, with the help, of the wrapped protocol, ERC20 (Ethereum) tokens, can be traded and exchanged, on the Tezos blockchain. This is a way, to avoid, the high transaction fees, on Ethereum. In this article, a Tezos decentralized exchange, was mentioned. It's name, is Dexter. I decided to find more about it, and I found some interesting things, that I decided to share, with this article.
Dexter, is a non-custodial, decentralized exchange, for Tezos, and FA1.2 tokens. FA1.2 tokens, are something similar to ERC20 tokens. Instead of the Ethereum blockchain, FA1.2 tokens, exist on the Tezos blockchain. Because the exchange, is non-custodial, it has no funds of it's own. To have funds available, for trading, it allows token addition to pools, by users. To add to the liquidity pool, you must add an equal value of XTZ and FA1.2 tokens to the smart contract. The liquidity provider, gets a liquidity fee, of 0.3% on each trade, paid by the trader. This is interesting, so I decided, to dive in, more.
The exchange itself, is a smart contract, that connects to two wallets. Thanos, and Beacon. Some reports, show issues, if both browser extensions (both wallets), are on the same browser. Trading, is easy. When you can ask for a FA1.2 token, that is in the pool, you get the same value of the XTZ tokens deposited, minus the liquidity fee. If you want to sell FA1.2 tokens, you get the same value of XTZ tokens minus the liquidity fee. If you want to change one FA1.2 token, to another, there are two transactions. One, from Token A to XTZ, and the second. is changing XTZ to the second token. Each transaction, has it's own 0.3% liquidity fee, so a total of 0.6% for both.
Here comes the interesting part. When you add funds to the liquidity pool, you get an equal amount, of pool tokens. They have only one purpose. To send them back, anytime, and redeem your XTZ and FA1.2 tokens. So the value, never leaves your wallet. It is something new, in investing, as your funds, must leave your wallet, with traditional investing. Your only risk, is the risk of a smart contract, problem. The pool tokens you have, are the proof of your funds, if something goes wrong. You can use them to redeem, after the problem, is fixed.
Dexter creates a market between, the native XTZ token and a smart contract based FA1.2 token. FA1.2 tokens, are fungible and transferable. To add a token to Dexter, the token, must comply to a list of expected behaviors, so it will be compatible, with the Dexter smart contract. When you look at the liquidity pool data, you can see, that there are around 8 Tezos wrapped Bitcoins, in the Tezos/BTC pool, and around 98,000 USDC wrapped in the Tezos/USDC pool. Adding the Tezos tokens, brings a market cap, that cannot be neglected. With the current Bitcoin value, around 19,000 there are aprox. 153,000 USD value x 2 = 305,000 USD in the BTC pool, and 98,000 X 2 = 196,000 in the USDC pool. This gives a total, about 500,000 USD liquidity, in the exchange. Not bad, at all, for a decentralized exchange.
Find out more at:https://dexter.exchange/