Trading is the absolute core of the Crypto world, but different practitioners have very different channels for completing trades.
In centralized exchanges, they almost carry the entire industry's trading liquidity. The platform has high matching efficiency, good trading depth, and fast transaction speed in a centralized mode.
However, for the native world of public chains, decentralized exchanges based on smart contracts are the core of trading on the entire chain and the liquidity core of on-chain business. The token listing and trading rules of decentralized exchanges are the same as those of public chains, maintaining the characteristic of permissionless trading, forming a distinct "threshold" difference from centralized exchanges.
If we look at each public chain individually, there will be a core decentralized exchange for each chain, revitalizing the entire chain's business and ecosystem. We even see a "token business full chain" built around DEX on Ethereum and Solana.
In this cycle, the TON public chain has gained fame, but the ecosystem development of TON is still very early. The DEX applications on the TON public chain are overall "few and single-functioned". Compared to the mature Ethereum and Solana, how should the DEX applications on TON develop?
Mature DEX on Ethereum and Solana
Undoubtedly, the most mature development of DEX is currently on Ethereum and Solana.
The DEX on Ethereum has benefited from the long-term development of Ethereum DeFi, while the development of DEX on Solana has benefited from the performance and ecosystem heat of the chain, with DEX trading volume once reaching a level comparable to CEX.
Next, let's take a look at the development of DEX on these two chains separately.
The earliest DEX on Ethereum is Uniswap, which pioneered the AMM model. It uses token pools with proportional input as liquidity supply for trading pairs of two tokens. In the iterations of the Uniswap application, V1 is the simplest version of AMM, V2 optimized the trading matching and LP functions, and V3 added the ability to provide liquidity in a fixed price range, beginning to provide friendly support for professional liquidity providers. This is the current running version. In addition, V4 is also being implemented with features such as limit orders.
From the changes in iterative versions, Uniswap continuously upgrades the asset management functions for LP to ensure smooth user trading, representing the optimization direction of DEX.
In addition to swap and AMM LP, Uniswap has also achieved good results in MEV and Oracle in the DEX business.
Firstly, in terms of MEV, Uniswap maintains a certain resistance to MEV, guarding against sandwich attacks and higher slippage caused by MEV and impermanent loss.
In terms of Oracle, DEX is almost the fastest source of trading pair prices and the most comprehensive source of trading pair data on Ethereum, allowing many DeFi protocols to choose DEX-based Oracle pricing solutions instead of Ethereum chain external Oracle solutions like Chainlink. This allows DEX to use "Oracle" capabilities as one of the output capabilities to form the data module of other DeFi applications (such as lending protocols and derivative trading markets).
Uniswap represents DEX, but the refined functions required in the 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, as well as aggregator-type DEX like 1inch, MetaMaskswap, Matcha.
Among them, the appearance of Balancer has made the centralization of DEX as the liquidity center of on-chain applications more refined. Firstly, Balancer proposed management of liquidity supply: liquidity pools with different weights and multiple tokens, boldly changing Uniswap's proportional liquidity pools to custom proportions and multiple tokens, which is conducive to project liquidity supply and market value management. Furthermore, Balancer also changed the rules of Launchpad purchases to LBP rules that are more favorable for users to obtain reasonable token prices, changing the impact of AMM pool front-running on trading prices.
The existence of Curve mainly presents the market for on-chain stablecoin trading, providing liquidity for various stablecoins and pTokens. Stablecoins and pTokens are essential for the trading process of DeFi and are necessary for the realization of on-chain transactions and business. In the token's economic mechanism, some also serve as buffers.
Looking at DEX such as Balancer, Curve, Sushiswap, DODO, in addition to exchange trading, another important business is providing staking pools for LP and pTokens to achieve asset compounding. These DEX not only aggregate the LP liquidity of AMM but also play the role of supply chain for applications such as DeFi.
In summary, we can clearly see the mature chain developed based on DEX on Ethereum. However, when the transaction confirmation speed is fast enough, or when the on-chain data feedback is fast enough, the corresponding business may evolve into another form. For example, Solana.
The DEX on Solana, unlike Ethereum, has an experience almost identical to CEX, and if the transaction confirmation is fast enough, the role played by DEX and aggregators is consistent. At this point, what DEX cares most about changes from "all on my platform" to "where are the trading pairs and corresponding LP pools."
Therefore, support for LP will become more refined.
Since Uniwap V3 proposed the LP with a fixed price range, all subsequent innovative DEX have added price management on top of LP.
On Solana, the most refined DEX design is Jupiter, and the most refined liquidity pool function is Meteora. Compared to Meteora, the main function of Jupiter is to provide liquidity for corresponding trading pairs. Its refined settings for LP include not only price ranges but also token volatility curves, proportions, etc. In addition to the rich LP functions, Jupiter also focuses on token issuance, designing for user needs, such as allowing users to use Dollar Cost Averaging (DCA) to make batch purchases of tokens.
In addition to DEX, almost all wallets on the Solana chain have the function of trading pair aggregation, and with the extremely fast transaction confirmation speed, users no longer need to enter DEX to complete swap operations.
This reflects the design characteristics of DEX applications on high-speed blockchains: when designing functions, modular openings should be left, and functions can be plug-and-play combined, allowing all user entry points to quickly integrate DEX trading modules, so that when users need to swap, they can use the liquidity on their own DEX.
Current Status of TON's DEX
With Ethereum and Solana's DEX being so mature at this stage of the cycle, how is TON doing now? How much is the difference, and where is the difference?
The performance and pressure-bearing capacity of TON are the only ones that can be compared to Solana among all public chains at present, but the ecosystem of TON is a combination of Web2 and Web3 modes, which will fade Web3 in usage and delve deeper into Web3 in technology.
The DEX in the TON ecosystem has this feature very clearly.
For example, Telegram has built-in a centralized trading pool to complete the recharge of stablecoins and TON, and then complete the exchange of TON and other tokens. From a functional perspective, it is already a simplified version, and the operational experience is almost identical to CEX's instant exchange.
This feature is the first function of Telegram's Wallet, and the second function is to interact with the TON public chain wallet TONSpace to experience basic usage consistent with using MetaMask on PC and mobile. If token exchange is needed, the commonly used options within the ecosystem are STON and Dedust, but their functionality is similar to Uniswap V1.
Clearly, this reflects the shortcomings of TON in the DEX area. While Telegram Wallet provides a CEX-like experience, TONSpace and DEX can interact on PC and mobile. Finally, Telegram's MiniApp and Bot will also serve as the trading front-end for DEX or CEX functionality. These designs meet the optimization needs for trading experience, but the backend native interaction with the chain is clearly lagging behind.
Currently, all DEX seen, such as STON and Dedust, only provide trading functions similar to Uniswap V1. In our analysis of the Solana DEX ecosystem, we see that for high-speed blockchain DEX, it is important to provide trading liquidity or modularize trading functions to make liquidity advantages the reason for user choice.
For trading on TON, the front-end entry points will largely exist within Telegram. DEX, like Jupiter and Balancer, need to increase the level of business refinement, balancing the needs of all users, whether they are users, token providers, liquidity providers, or platform developers, each role requires a certain level of refined functionality to complement.
What projects are improving DEX on TON?
Compared to DEX such as Uniswap, Balancer, and Jupiter, TON has not yet seen (or has not yet launched) a project that can fully supplement all functions. However, after reviewing the publicly available project design ideas in the entire ecosystem, the author found that the upcoming DEX on-chain trading middleware LayerPixel has the potential to complete the TON DEX functionality.
LayerPixel, incubated by the TON public chain's launchpad TonUP, is a DeFi solution designed for Telegram Mini App, officially referred to as Layer 1.5. It can provide wallet and DEX (multiple trading algorithms) services, and in addition to launching PixelSwap directly to consumers, it also provides an embedded SDK suite for developing swap functionality for other applications based on Telegram Mini App.
What TON needs is the existence of corresponding roles in the entire asset-related scenario. This entire scenario includes asset issuance, asset trading, trading liquidity supply, oracles, asset pools, wallets, and more.
The function of IDO is for issuance. On Ethereum, there are regular grab-style IDOs and LBP-style competitive bid IDOs. During a grab, it is easy to drive up gas and token prices, which can easily lead to a high opening price followed by a sharp drop. Therefore, the adoption of LBP, from a mechanism perspective, reduces the competition for traders, allowing them to consider buying after the price meets expectations. In the scenario chain provided by LayerPixel, TonUP can provide IDO issuance, incorporating LBP rules into the issuance of TON's Launchpad.
After IDO, tokens begin to provide liquidity and composite trading, at which point DEX intervention is needed.
LayerPixel's Pixelswap is a DEX based on weighted pools, with functionality similar to Balancer, supporting the issuance of assets through LBP. This type of Dutch auction issuance method is suitable for small and medium-sized projects with low FDV, which are the most common types of GameFi projects within the Telegram ecosystem.
The more refined the design, the more DEXLP becomes like the mature LP in centralized exchanges, actively ensuring fund yields and isolating risks.
After token trading on DEX, the next steps will involve Oracle, Pool, and wallet business.
Oracle is the process of providing real-time prices from AMM to external DeFi, DEX, aggregators, lending, asset bridges, and more. Based on the rich AMM, it naturally has this capability. Pool is a tool for users to compound other multi-assets, and in the case of abundant on-chain DeFi, various pTokens may appear, such as many Ethereum DEX providing exchange and staking for Lido's stETH. Finally, the wallet provides a user-operated entry point outside all trading platforms, with the support of a high-speed blockchain, integrating all functions within the wallet, combined with other applications.
LayerPixel has designed all these parts in its business chain, and after communicating with their team, it was found that their goal is to supplement the design shortcomings of DEX on TON and hope that multiple functions based on LayerPixel will become middleware for TON's DeFi.
The latest information obtained is that the code part of LayerPixel has been developed and submitted for auditing by auditing companies. For security reasons, the audit is being conducted by two auditing companies in a cross-audit, and will be officially launched on the mainnet after the audit results are completed.
In conclusion
After observing the applications of TON, it is evident that TON relies heavily on Web2, a design aimed at lowering the entry barriers for Telegram users. However, based on the experience of the development of multiple high-speed public chains, the official Telegram wallet may be more of a wallet verification tool in the future, assisting users in more direct native on-chain transactions to ensure asset security and the correctness of Web3 interactions.
For public chains, DEX is the place where on-chain vitality is released, and the goal of each DEX is to become a mature financial trading platform, giving users precise and mature asset management capabilities.
TON has been at its ATH, and the ecosystem value continues to grow. At a time when TON's development is thriving, the data performance of project value will be concentrated on the trading pairs of DEX. Therefore, the more mature the development of DEX, the greater the chance for investors to seize opportunities.
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