What is it like trading on a DEX supporting multi-chain asset transactions?
When users choose exchanges, what are they choosing after all?
Safety should definitely come first. Centralized exchange (“CEX”) adopts the centralized custodian mode. What users trade on CEX is just a pile of data, because users’ assets do not actually belong to themselves until withdrawn to their decentralized wallet. While DEX assets are all deposited in the user’s wallet address, and thus are completely in users’ own hands, which makes DEX more secure than CEX.
The second to consider is trading experience. The trading experience of DEX depends on the performance of its public chain. Taking Ethereum, the №1 ecology of DeFi, as an example. Its long confirmation time and high gas fees are discouraging users from using the platform, which stimulates the development of public chains with high-performance, such as Avalanche, BSC and HECO. DEXs with high-performance and low-cost such as HurricaneSwap and MDEX are also springing up.
The third to consider is asset diversity. With the development of blockchain technology, there are over 12,000 kinds of encrypted currencies and hundreds of large-scale public chains. Therefore, whether the DEX can support assets that users want to trade is another important factor to consider. DEXs that only support a single type of asset definitely fall behind the trend of multi-chain development in the blockchain. Users need DEXs to connect all kinds of assets to meet their diversified transaction needs.
Therefore, in the long run, on the premise of ensuring protocol security, DEXs with high efficiency, low cost, good user experience and the capacity to support multi-chain assets transactions will be the inevitable development outcome of blockchain. This is the result of survival of the fittest in users’ natural selection.
What is HurricaneSwap?
HurricaneSwap is a DEX built on Avalanche and supports multi-chain asset transactions.
Avalanche is an open source blockchain platform designed for DeFi. Its transaction confirmation time is only 4 seconds and can handle over 6000 transactions per second. It is highly scalable and decentralized, and thus can meet DEX’s requirements for security and high frequency transactions.
HurricaneSwap utilizes the unique Roke Protocol. It can simultaneously support dozens of heterogeneous blockchains and the transaction of a myriad of assets, such as Bitcoin, Ethereum, BSC and HECO. Users can easily trade BTC, ETH, CAKE, MDX and other high-quality assets through the Avalanche chain.
Different from other DEXs, HurricaneSwap achieves multi-chains transactions by establishing Stations on source chain, and creates a transaction pool on Avalanche. In other words, it shifts the liquidity of assets from the source chain to Avalanche, to realize the seamless transaction of multi-chain assets. Users do not need complex operations like the cross-chain bridge, which makes the transaction process more convenient and faster.
How to realize transactions of multi-chain assets in HurricaneSwap?
The key to the cross-chain mechanism of HurricaneSwap is the minting and burning of LP assets.
As we all know, to realize asset transaction in DEXs, we must first establish a liquidity pool, also known as, the transaction pool. In the current mainstream automatic market making (“AMM”) mode, the way to establish a liquidity pool is to inject two tokens of the same value into the pool, pricing the assets according to the constant product formula, after which users can freely trade in it. Generally speaking, the deeper the liquidity pool is, the lower the transaction slip will be, that is, the actual transaction price will be closer to the target price, and the transaction experience will be better.
In order to encourage users to add liquidity to the pool, DEXs often provides tokens for incentives, which is often called liquidity mining. After adding liquidity to the pool, the liquidity provider will get LP tokens, the proof of liquidity provided by the user and the credential used to exchange for the liquidity mining reward.
The cross-chain mechanism of HurricaneSwap is designed based on LP tokens.
HurricaneSwap creates a Station on the source chain to lock LP tokens which record the assets added in the liquidity pool before the lock-up and verification by the Verification Node. Based on the record, it then mints the same number of LP tokens on Avalanche. In this way, the assets contained in LP tokens are transferred to Avalanche to establish a liquidity pool, and thus realizes the trading of multi-chain assets on Avalanche.
Taking the cross-chain of BSC assets as an example. User A locks the corresponding amount of BNB and USDT at BSC Station to generate and stake LP tokens. After verification by the Alliance, aBNB/aUSD will be minted for users at the rate of 1:1 on Avalanche and added to the liquidity pool, to realize the cross-chain of LP assets.
When users need to remove liquidity, they only need to send a burning request on Avalanche. After Verification Node confirms the burning, the station will unlock the LP token and send it to users’ address through the source chain.
The Verification Node Alliance of HurricaneSwap is mainly composed of essential participants in the Avalanche ecosystem, including well-known wallet service providers, asset trust, decentralized exchanges, etc. It uses multi-signature to implement the mapping of cross-chain assets, building the mechanism to mint and burn the cross-chain assets.
For HurricaneSwap, its cross-chain capacity can bring more capital and users to the protocol.
Currently, most DEXs do not support direct asset transfer across heterogeneous chains. HurricaneSwap not only allows users to trade their original assets on the protocol, but also captures more funds and liquidity from other chains by connecting heterogeneous assets to the protocol. For example, access to exchange public chains like BSC and HECO, which have millions of users, can greatly increase the scale of HurricaneSwap.
When users utilize DEXs for transactions, they would expect that the DEXs could support all their favorite digital assets, and then complete the transaction in a safe, quick and cheap manner.
Cross-chain transactions enrich the asset categories of HurricaneSwap and meet users’ diversified transaction needs. Through the Roke Protocol, high-quality assets on multi chains are gathered on one transaction platform. Users only need one account to manage assets on different chains, which greatly reduces the use threshold and the friction cost of switching between different protocols.
Meanwhile, HurricaneSwap also provides a means of value capture for liquidity providers — users who lock LP tokens in station. Liquidity providers can obtain 0.3% of HurricaneSwap’s transaction fees as the reward for liquidity mining, which is higher than the common 0.2% to 0.25% provided by other DEXs. This will attract users from other chains to lock LP tokens and provide liquidity for the transaction pool of HuricaneSwap. Meanwhile, HuricaneSwap will also provide more transaction depth and a better user experience.
Although the current number of users and lock-up of Avalanche is less than that of Ethereum, BSC, HECO and other public chains, HurricaneSwap, through multi-chain asset transactions, greatly widens the boundary of its ecosystem and seamlessly connects assets on other chains to the same platform, which enables users to trade a variety of high-quality assets in one protocol. Users and traffic inflow attracted by HurricaneSwap will also in turn benefit Avalanche, by helping it to establish a more complete ecology and achieve win-win cooperation for multiple parties involved.
Although the DEX has achieved considerable progress, there are certainly downsides. Given that Ethereum has major weaknesses in its infrastructure and performance, and that other high-performance public chains have not yet found mature cross-chain solutions, HurricaneSwap has the opportunity to stand out with its safe, fast and cheap cross-chain mechanism. In addition, with the development of the Avalanche, HurricaneSwap, as its traffic entrance and ecological portal, will be the most expected and competitive product in cross-chain DEXs.