Best DEX's on Solana
Blockchain technology has more than a UX problem: Blockchain has an Inclusivity problem. Blockchain technology promised to remove the middleman and empower the vulnerable, the displaced, the unbanked, and put in their hands tools that would help them reach a new level of financial freedom.
However, during summer of 2020, while eyeballs were focused Decentralized Finance, it was made clear to everyone that the fees on the Ethereum Main Chain were pricing out and excluding those individuals it was designed to empower.
For individuals with very little assets (for the very rich, the fees are never really a problem), it became redhibitory to swap or transfer assets on the Ethereum Main Chain. Even claiming free airdropped tokens, something that could easily change the lives of those with very little assets, was impossible since the cost of claiming sometimes exceeded the value of the tokens themselves!
Even moving assets to Layer 2 solutions (such as ZKSwap, which started its life as a Validum but became a full-fledged Zero Knowledge Roll-up powered Decentralized Exchange) was an expensive endeavour since to initiate a transfer to a second layer, gas fees need to be paid.
Ethereum’s promise of financial freedom threatened to remain but a promise – never to be realized.
DeFi summer’s fee crisis has productively challenged the minds of the best developers of the Ethereum ecosystem. How do we provide a better user experience? How do we mitigate congestion and keep those fees under control, knowing that what is good for users is also good for us developers?
A tremendous amount of progress has been made since DeFi Summer. While the fee crisis has not subsided, users now rarely have to pay hundreds of dollars to see a transaction settled. However the fact remains that things could be much better – that blockchain could be more inclusive. This fee crisis has predictably sparked interest for neighboring blockchains, sidechains (such as xDAI) and layer-2 solutions, which all promise lower fees and faster transaction times.
Solana, positioned as an Ethereum-killer (which it is not: upon closer examination, we find that Solana and Ethereum complement each other) has emerged as a solution to this problem. Solana was built from the ground up in Rust (this project even has the revered inventor of the Yew.rs framework on board) to address the recurrent problem of high fees and slow transactions times.
Solana is a bit of a monster: this blockchain boasts 400 ms block times, 50 000 transactions per second, and average fees of $0.0001. These specifications make Solana an ideal blockchain on which to build Decentralized Exchanges.
It was inevitable: a few DEX platforms have emerged that fully take advantage of Solana’s power – a highly desirable outcome. Solana is highly scalable: it is expected that this chain will double in capacity every two years, thanks to hardware and software improvements. Solana’s roadmap forecasts 1 Million Transactions per second and 150 ms block production times!
We did come across very promising DEX platforms such as Terra LunaDex and SolApe (a most convincing meme DEX effort), however the four DEX platforms described below seemed the most relevant and the most important.
List of the most promising DEX’s on Solana
Serum, launched in August of 2020 (and so, during DeFi summer!), is a permissionless, decentralized exchange platform that features extreme speeds and allows assets to be traded across blockchains. Serum’s full-limit order book and matching engine are decentralized and support all the legacy tokens we know and love, such as Bitcoin, Ethereum, Chainlink and many more. The fees are competitive and users can enjoy steeper discounts (up to 60%) if they pay fees using SRM tokens (Serum’s native token).
Serum partners can take advantage of Serum’s shared orderbook features which provides deep liquidity to platforms that tap into it. The shared liquidity feature enables other platforms to offer unprecedented liquidity to their customers – thanks to Solana’s composability.
Raydium is the largest DEX on Solana. It also happens to be the largest Market Maker within Serum. It distinguishes itself in the way it handles liquidity: it can use its own liquidity pools to settle trades or “plug” into Serum and use its orderbook! So when users initiate a trade, it will either be settled by Raydium’s own liquidity pools or routed to Serum. All of this will happen in milliseconds.
The Raydium team doesn’t plan to stop there: they plan to implement Stablecoin pools, which would simplify the process of swapping stablecoins or synthetics with the same underlying asset.
Raydium provides incentives to liquidity providers and RAY token holders, in the form of free coins within the pool they are active.
Solanax is yet another Decentralized exchange that leverages Solana’s fast transaction time to provide a great user experience with zero front-running. Fees for providing liquidity, farming and harvesting rewards are extremely low here – but how low is not clear, as even Solana’x website and a recent Press release won’t share figures.
Solanax does not have an order book. Its model mimics (and we mean this in a good way) Uniswap – Liquidity Pools are the centerpiece of its trading mechanism. Users are able to execute contract-based limit orders (User to Contract orders) that settle instantly and at a fraction of the cost of doing so on the Ethereum Main Chain.
Here again, Solanax provides a striking example of composability within the Solana ecosystem: Solanax can grant access to its own orderbook to other Decentralized Exchanges and applications – access to the Solanax order flow and liquidity.
A planned Wormhole bridge implementation will open the path to lighting fast cross-chain swaps and allow users to seamlessly trade Ethereum, Binance Smart Chain and Solana assets.
4. Orca DEX
Orca DEX is not the meme DEX you think it is! While it may look like a colorful copycat of its peers, it provides a feature that truly distinguishes it from the rest: the Orca fair price indicator.
The fair price indicator provides users the guarantee that the price they are offered within a pool is accurate and within tolerance limits. If the rate offered is within 1% of the listed market rate on CoinGecko, and if slippage is less than or equal to a user’s tolerance (this has to be set in their settings), then users will see a great big checkmark, meaning they can confidently initiate their trade, knowing they will get a fair rate.
If these two conditions are not met (price within 1% of listed price on Coingecko and slippage within tolerance), then a warning will be issued.
The fair trade indicator allows users to make informed decisions very quickly, and this is especially useful when they have to execute trades with very little or no time to compare prices on other DEX platforms.