Many decentralized exchanges boast cross-chain capabilities, but in fact, the majority of them simply use bridging technology to perform swaps. To bring complete decentralization to crypto trading, one exchange has developed a fully cross-chain liquidity aggregation mechanic that does not rely on bridging.
Find out more about cross-chain liquidity in the latest Cointelegraph interview with Chainge founder Dejun Qian.
Q: What is the biggest problem facing DEXes at the moment, and why is it such a challenge?
DEXs have several problems, among which the most notable are: lack of liquidity, inefficient/hazardous interoperability solutions, and user experience.
The first two issues are partially correlated: Lack of liquidity is one of the primary reasons why some traders still prefer using CEXs. And it’s pretty difficult for DEXs to catch up since they have to rely on liquidity providers and can only access liquidity on one single chain. So naturally, users will go where they find better prices.
In addition, interoperability solutions like traditional bridges fall short when it comes to security and are a headache to use. On the UX side, DEXs seem to be made for connoisseurs. Traders have to know about chains, slippage, and impermanent loss, while on CEXs, trading is pretty straightforward.
Chainge focused on solving all 3.
Q: Why is interoperability still so hard to achieve across the global blockchain space?
In short: lack of resources. New blockchains and crypto assets keep popping up every day. With the lack of a bigger development community to work on bridges, the code isn’t audited as it should be for potential bugs. So, as it happens, developers build bridges upon bridges in an attempt to cover as much of the blockchain market as possible but lack the resources (time and experienced devs) to ensure 100% security.
Q: What will a higher level of interoperability bring to crypto traders and investors that they are lacking at the moment?
The first and most crucial direct benefit for traders and investors is increased ease of use. Just like people don’t have to care where the money they spend was printed, neither should crypto users care what chain their assets are on. They’d be empowered to move assets between chains in a flash without worrying about security, high fees, long waiting times, or overly-complicated operations. Furthermore, true interoperability also brings into play cross-chain aggregated swaps. This means they’d access more liquidity and get significantly better prices for their swaps.
Q: How does Chainge solve liquidity and slippage issues across the numerous chains involved?
Simply put: Chainge Finance is currently among the premier DEX aggregator working with cross-chain liquidity. This means when a user initiates a swap, the smart router will split his transaction across several chains simultaneously, depending on which ones are the most liquid. The end result is that Chainge puts at the user’s disposal the sum liquidity across the most liquid chains, so the slippage is minimal, and the prices are verifiably better than on other DEXs or aggregators.
Q: There are a number of cross-chain DEXes that are active right now. What separates Chainge from the rest?
This is a great question, and while it’s easy to answer, it’s a bit tricky to understand because of a recurrent terminology issue. The fact is that currently, no other cross-chain DEX on the market can aggregate liquidity cross-chain. They perform cross-chain swaps, meaning they bridge the assets post-swap to a specific destination chain.
But regarding liquidity, they only aggregate liquidity from DEXs residing on one single chain. At the same time, Chainge is able to split the transaction not only between multiple DEXs but across several chains simultaneously. While other platforms are just cross-chain (swap) DEXs, Chainge is a cross-chain (aggregated) DEX.
Q: How does the technology behind the cross-chain liquidity aggregator work?
Chainge combines the unique Fusion DCRM cross-chain technology and cross-chain swap pathfinder algorithm to facilitate traders’ cross-chain swap orders. Simply put, Chainge crawls active DEXs to find the best transaction rate for the user's target pair swap & then automatically helps them split the order between the sources. At the same time, it also splits said transaction across all integrated chains. This is why the price output is better than what is offered on regular cross-chain DEXs or aggregators.
Q: What is the future of cross-chain DEX aggregation? What can we expect to be the standard in the space in the next five years?
I expect actual cross-chain liquidity aggregation to become the standard within five years. While extremely time-and-resource-consuming, some aggregators will start working on solutions similar to Chainge’s. But since we’re talking about highly advanced tech, this can take a while.
Still, the Chainge APIs are already available, allowing instant access to cross-chain liquidity without the headache of starting from scratch or worrying about security. Cross-chain DEXs have a very bright future ahead and a likely possibility of replacing CEXs altogether in the long run.
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