DEX 7 years: the road to Uniswap

After the popularity of DeFi in 2020, many investors only paid attention to DEX like Uniswap. In fact, Uniswap is not the first DEX, in fact it has been in development for more than 7 years. The earliest DEX was born on the Bitcoin network. This Hardcore edition focuses on the evolution of DEX over the past 7 years, how to expand from Counterparty on Bitcoin to IDEX, decentralized exchange as thin as orders on Ethereum, and then to Uniswap under the AMM mechanism. BitMEX Research's "Battle of DEX".

Abstract: We study a brief seven-year history of decentralized exchanges (DEXes), including the first major iteration of technology, Counterparty. We examine the reasons for the failure of these early attempts, how they developed into the current Uniswap agreement, and Uniswap's genius mechanism for introducing and managing liquidity. Also studied Uniswap, copycat and how he got a position in the DeFi field. We conclude that the DeFi fever is largely due to unsustainable price bubbles and aggressive token issuance arrangements, fueling speculative demand. However, under the frenzy of unsustainable speculative and interconnected and complex DeFi platforms, we thought there might be technology that could bring about sustainable development. Non-custodial trading, leverage,

Foreword

As of January 2019, the concepts of a decentralized exchange (DEX) and a decentralized stable currency are intertwined to some extent. Should be considered as the two holy grails of financial technology. More specifically, the objective of a decentralized exchange or stable currency is quite simple and concise, namely to ensure that the system is not suspended in the face of regulatory pressures. If these systems could truly function, even the most skeptical of people would have no doubt about their potential transformative effects. A rational criticism of decentralized exchanges may be that they cannot work strongly.

For the blockchain system and its tokens, DEX is of course technically feasible. Since all tokens are native to the blockchain, a centralized order book and clearing mechanism can be used to create exchanges on the blockchain. This can be done on Bitcoin (eg Counterparty) or Ethereum. The main challenges are scalability, liquidity, availability, and ensuring the fairness of the exchange. This report will focus on the DEX without cross-chain functionality. DEXs looking to implement asset transactions on multiple blockchains or non-encrypted assets (such as US dollars) are another separate topic.

Counterparty

In 2013, Mastercoin is widely considered to be the first ICO in the DEX field. The goal of the project is to become an agreement to issue tokens on Bitcoin. The Mastercoin protocol basically interprets additional bitcoin transaction data as issuing or spending additional tokens. It established the Mastercoin Foundation to manage the proceeds from the ICO. However, the community opposed the founding of the foundation, believing that some people would have the privilege of managing and controlling the funds, which was unfair.

Therefore, in early 2014, a competition project, Counterparty, was founded. It has the same purpose as Mastercoin and has issued XCP tokens. Mastercoin token is MSC. The difference is that the Counterparties do not conduct an ICO. An ICO requires a small team to manage funds. The counterparties adopt "burn proof". Bitcoin is sent to an unusable address. The initial distribution of XCP tokens It's up to the person who burns the most bitcoins. This avoids disputes. Perhaps due to the issuance of "fairer" tokens and the hard work of lead developer Adam Krellenstein, the Counterparty protocol has managed to become the dominant token issuing platform in this area. To create new tokens, XCP tokens must be paid. But beyond that, their use is limited.

Counterparty is becoming the most popular crowdfunding platform in the industry. If an entrepreneur or developer wants to launch a new token via crowdfunding, Counterparty is the platform of choice. For nostalgia purposes, here are some examples of popular tokens issued by Counterparties:

Storj: The first token of the "decentralized cloud storage" platform, and after that issued another token on Ethereum.

LTB: Tokens are given to listeners for the popular "Let's Talk Bitcoin" podcast. After the ICO bubble in 2017, tokens were finally exchanged for new POET tokens.

FoldingCoin: A token used to reward those who donate computing power to folding DNA to study disease.

GetGems: The native token for instant messaging and Bitcoin wallet app.

BitCrystals: A token that rewards participation.

Swarm: Token for a new crowdfunding platform.

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