Current Market Pain Points
Decentralized finance (DeFi) is a blockchain-based financial infrastructure that has seen spectacular growth recently. The primary use case being replicating existing financial services in a more open and transparent way. This includes decentralizing trading platforms, by eliminating the need for a third-party with the introduction of smart-contracts.
Decentralized exchanges or DEXs, mark an important development for the industry as it progresses from the ecosystem of centralized exchanges. One of the few key reasons include stronger security guarantees to end users since there is no longer a central party as users are able to transact trustlessly - without a middleman. As such, DEXs have drawn the attention of privacy enthusiasts and investors alike.
DEX platforms like Uniswap and Sushiswap have seen immense growth within a very short time span along with the growth of the ethereum ecosystem. The network has seen financial products and services providers all over the world scramble to find decentralized alternative solutions and DEXes have been the most successful. With the growing popularity of DEXes and increasing trading throughput in DeFi, Ethereum is starting to hit bottlenecks..
- The Ethereum Network currently suffers from high gas costs per transaction and is plagued by network congestion. The only solution to this problem is its planned network upgrade but this will not come into effect for years.
- A number of options in the market currently offer low gas fees and high transaction speed such as COSMOS, BSC, and Solana. However, the larger ecosystem of public chains is not yet strong enough to accommodate public needs and chain interoperability is also lacking.
- The issue of public chain interoperability is due to the differences in technical architecture and the result of this is increased costs for DEXs that are deployed on multiple chains, trickling costs down to the consumer.
- A majority of DEX platforms employ the AMM strategy which is notoriously rigid in its operations and leads to ineffective market setups. This also worsens the already rampant issue of wild marker speculation.
- DEX and the DeFi industry as a whole, have too high of an entry requirement and this acts as a deterrent for users already used to CEX, and this limits long-term growth potential.
In order to succeed and provide the best possible service to users, DEXs need to offer the same hands-on experience that a CEX does, especially for emerging public blockchain systems. Consumer demand is heavily leaning towards cross-chain asset trading and portfolio diversification, even as the larger crypto industry expands. This is the foundation upon which HydraSwap was created.