How can blockchain projects benefit from deploying their own DEX?

Cryptocurrency exchanges have been instrumental in adopting blockchain technology, but the industry has become too dependent on them. Today, the crypto industry is still focused on exchanges and traders rather than blockchain projects and developers. There is too much friction for developers building projects on the app layer.

Being listed on a major centralized exchange (CEX) is a six-figure expense, plus additional fees each month for a market maker to ensure liquidity. In 2018, a Business Insider survey found that crypto exchanges cost between $50,000 and $1 million to list initial coin offerings (ICOs).

Even after these expenses, the exchanges are the ones who profit from all the trading fees, which drain value from crypto projects and make it difficult to attract liquidity in a sustainable way.

In addition to exorbitant listing fees, DApp builders lose control over the liquidity and value of their tokens by following exchange policies and fees. Additionally, listing on centralized exchanges can also lead to counterparty risk (not your keys, not your coins).

Regain control of native tokens

One of the alternative approaches to attract liquidity is to turn to decentralized exchanges (DEX), which have reduced counterparty risk and low fees due to the absence of intermediaries. This solution could give app builders more control over the liquidity of their tokens, reduce reliance on centralized exchanges, and improve security. Also, using DEXs instead of CEXs allows blockchain applications to take advantage of DEX features, including non-custodial trading, reduced security risk, and lack of KYC obligations.

As beneficial as DEXs are, they have some drawbacks. For example, they are limited by the transaction capacity of their networks. As volume increases, so do the fees for executing trades. This has become a major problem for DEXs, many of which are hosted on Ethereum and use an Automated Market Maker (AMM) to manage their trading. Additionally, DEXs are not efficient enough to compete with CEXs (eg in terms of capital efficiency and liquidity levels). Ultimately, DEXs prioritize generating revenue for their liquidity providers and token holders, not the projects that use them.

Although using a DEX enables self-storage and permissionless settlement, they are not efficient enough. DEXs still lack support for off-chain pricing models, where pricing is based on the total aggregate liquidity in the market (both on- and off-chain) as opposed to the liquidity that happens to be in a given AMM’s smart contracts.

It is a point of friction in the user experience as well. Visiting a third-party DEX forces users to abandon the apps they love when shopping.

Shopify for DEXs

The solution could be to make DEXs as efficient as CEXs and give each project ownership of its own DEX. But how to do it? The good news is that there are specialized projects that provide such DEX-as-a-feature solutions, and one of them is Native. The project makes it easy for developers to deploy exchanges, integrate directly into their DApps, earn their own exchange fees and access the liquidity across the network.

Native is a DEX infrastructure layer, or more simply, a toolkit for any other project to become its own DEX, cutting out middlemen and lowering costs, much like Shopify allowed entrepreneurs to create their own e-commerce sites.

Native’s proprietary integrations with professional liquidity providers and market makers account for over 30% of daily crypto trading volume, giving the teams a significant advantage over standalone DEXs. Best of all, it’s completely free to use: projects set their own exchange fees, which go to token issuers.

The technology behind Native matches CEX-level efficiency and is fully modular, meaning teams can create any type of exchange they want, using any liquidity source, pricing model, and trading pair they want. Projects can work directly with professional liquidity providers and market makers in a permission-free way, on-chain, and get their own liquidity.

Liquidity is king

Liquidity can come from one of three sources: the project itself, the community or external liquidity sources such as automated market makers (AMM), aggregators and professional liquidity providers. Native can leverage a wide range of liquidity resources thanks to its approach of using off-chain pricing and on-chain RFQs (requests for quotations), which allows any project to use market makers and professional liquidity providers for on-chain liquidity.

By providing a decentralized infrastructure layer for DEXs, Native takes a big step towards solving the liquidity and control issues faced by blockchain projects. With its innovative approach and focus on empowering crypto-entrepreneurs, Native helps blockchain projects benefit from increased revenue and deeper liquidity. Meanwhile, DApp users can exchange the native token directly in the app, enjoying a simpler and more frictionless experience.

Ricky Li of Nomad Capital, which invested $2 million in Native’s seed round, said:

“Native empowers everyone to have their own DEX and control over liquidity and fees. The vision is that no builder or user should be held hostage by CEXs and centralized DEXs like Uni or Curve to facilitate liquidity. This really resonates with our belief that a financial infrastructure layer is missing that will enable us to scale and attract the next users. We need more DeFi middleware infrastructure projects like Native.”

To demonstrate the ease of use of the technology, Native released 5minuteDEX, a fully functional DEX with deep liquidity across all the top trading pairs.

Source: 5minuteDEX.com

Native launched its private beta in March this year and opened up the platform to everyone in April in a permissionless manner.

By offering a DEX layer, Native enables teams to create their own DEXs, reduce costs and regain control of their original tokens. Thanks to this approach, Native has managed to secure strategic partnerships with many blockchain projects, including Ankr, NodeReal, Metaverse.ai, Augmentlabs.io, CyberConnect, QuestN, LightNet and Byte.City.