The DeFi ecosystem has been growing really fast for the last couple of years.
According to defipulse, the leading data & analytics provider for Decentralized Finance applications, there are over $27B assets locked in DeFi protocols as of January 29th (Source: https://defipulse.com/)
The idea that traditional financial models (banks, loans, mortgages…) can be recreated using blockchain technology has caught everyones attention, and the developments of DeFi have been incredibly quick, in no small part thanks to decentralize exchanges (DEXs).
A decentralized exchange expands the same idea of traditional (centralized) exchanges of buying and selling assets, but does it in a way that the user does not need to complete a registration, and can trade freely with other users, with full custody of his assets at all times.
That means no need for kyc or complicated processes, less risk of losing funds, and the ability to list any token freely on the exchange. (Source: https://academy.binance.com/en/articles/what-is-a-decentralized-exchange-dex)
Uniswap Changed The Game
Until Uniswap, DEXs were considered slow and hard to trade in, due to low liquidity.
Uniswap’s constant product automated market maker enables thetrading of blockchain token without relying on market makers, bids or asks. This overturns centuries of practice in financial markets, and constitutes a building block of a new decentralized financial system. (Source: Lo, Yuen and Medda, Francesca (2020): Uniswap and the rise of the decentralized exchange)
Although describing Uniswap in detail is beyond this blog, the basics of the DEX were that users were the ones that provided liquidity to the exchange (allowing easier transactions), in return of % fees and crypto tokens.
Uniswap made it possible for people to interact and exchange cryptocurrencies without third-party involvement, allowing users to have more freedom when it came to their assets, and providing liquidity for great projects that didn’t have strong volume.
Uniswap even surpassed Coinbase Pro in daily volume! https://cointelegraph.com/news/defi-explosion-uniswap-surpasses-coinbase-pro-in-daily-volume (Coinbase is one of the biggest crypto exchanges in the world!)
Other DEXs
SushiSwap took the same concept from Uniswap and made it more accessible and democratic:
SushiSwap is a fork of Uniswap with some key differences — most notably, the SUSHI token. The token has two functions at launch: entitling holders to governance rights and a portion of the fees paid to the protocol. In a simplified way, SUSHI holders “own” the protocol. (Source: https://academy.binance.com/en/articles/your-guide-to-sushiswap)
Another important DEX is PancakeSwap, built on the Binance Smart Chain.
The developers of PancakeSwap cite high fees and slower speeds of the Ethereum blockchain as a driving factor in building on Binance Smart Chain. Ethereum may have kick-started the DeFi trend, but initiatives like PancakeSwap suggest that the wave of innovation is destined to spread to other chains. (Source: https://academy.binance.com/en/articles/a-guide-to-pancakeswap)
The key aspect of DEXs that came after Uniswap is that the DeFi gates opened up: decentralized exchanges become necessary for the DeFi revolution, as a way to transact without the need of middlemen, making the whole process simpler, cheaper, and more accessible.
LavaSwap: How It Fits in The DEX Market
Lava Swap is the first interoperable decentralized cross-chain swap protocol powered by Huobi Eco Chain.
We are creating an automatic market making DEX. We envision a world where all crypto assets can come play in our BLAZING DeFi playground.
LavaSwap is built on top of Huobi ECO Chain (HECO) for many of the same reasons PancakeSwap was built on top of BSC: lower fess, faster speeds and a huge ecosystem (although HECO is faster and cheaper than BSC 😉).
HECO is a DeFi-focused chain with rapid transaction times, low gas fees and a massive built-in community from the world-class Huobi exchange ecosystem.
In order to expand the DEX ecosystem, we had to create something that
1. Was fast & reliable
2. Was secure
3. Was fun & exciting to use
4. Was unique, with cross-chain capabilities
For LAVA, we want interoperability to be front and center.
While we think the ETH network is great, DeFi does not belong only to one chain. It should be accessible for everyone.
As DeFi grows further, interoperability and opening access to emerging ecosystems such as HECO will enable greater mainstream adoption.
We see the HECO ecosystem expanding fast. DeFi has caught the attention of many people, and the demand for it will only get stronger. We don’t think the ETH network will be the only provider, so having a strong name such as Huobi will help the HECO ecosystem a lot.
Cross-chain is a must because DeFi should not be limited by individual networks, because the average consumer would want an end product that is simple to use and accessible. After all, that’s the whole premise of DeFi!
Lava’s Cross-chain bridge will open up assets to play across the whole crypto world.
We are following the steps of giants, and will continue to work hard on the DEX space to provide users with the best experience possible when trading cryptocurrencies and discovering the possibilities of DeFi.
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LAVA is a the first interoperable decentralized cross-chain swap protocol powered by Huobi Eco Chain. We believe that DeFi should be fun and easy to use for everybody!
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