It’s been one heck of a week, to say the least. Depending on what side of the fence you stand on, you’re either happy that you waited to buy into whatever altcoin you’ve been eyeing. Or you’re kicking yourself for not waiting. Either way, I assure you we’ve all been there and forgot to grab our t-shirt on the way out. If this is the first time you’ve experienced this in the market, congrats, you’re well on your way to becoming a crypto OG before you know it. While no one likes to lose half the value of their position in a blink of an eye, it teaches valuable lessons about managing your risk and helps mentally prepare you when the next FUD cycle makes its way through the crypto space. Because it’s not the first and far from the last time a manufactured narrative will cause chaos in the markets. Moving into this week’s review, we’ll be looking at a new take on the traditional DEX with Polkadex.
Polkadex is a new and completely decentralized p2p orderbook based exchange built for the growing DeFi ecosystem. More specifically, the Polkadex Orderbook is a non-custodial Layer-2 based exchange built on the Polkadot Network. Polkadex’s design focuses on reducing the complexity of the Polkadot chain. Believing that only information which needs to be publicly verified should be on-chain. In Polkadex the order book, trader assets management, bridges between Polkadot and Ethereum, and market-making bots are all managed on-chain. Trading features like market data aggregation, technical analysis indicators, storage and retrieval of trade history, and all the remaining exchange-related data are managed off-chain. Enabling Polkadex to increase the throughput of trades and make it comparable to the efficiency currently present in centralized exchanges. With trustless cross-chain bridges helping to bring any blockchain token to Polkadex in a non-custodial and trustless manner. Through Parachains with the Polkadot Network, and through Snowfork on the Ethereum Network. Polkadex is built specifically for integrating with other liquidity providers using forkless upgrades without the need to access user funds or contract keys. The majority of new DEXs just copied Uniswap and moved to an AMM-based system. On Polkadex, they aim to find a real solution to users’ needs and create the ultimate trading experience that doesn’t make all the sacrifices of current DEX platforms.
Polkadex supports two types of trades, Limit and Market Orders. Market-taking orders have a competitive trading fee of 0.2%, while market-making orders have zero trading fees. Market makers are heavily incentivized by receiving half of the collected trading fees, with the remaining half paid to the Polkadex Team. Polkadex tries to solve the problem of low liquidity by having AMMs directly connected to its trading engine, acting as on-chain market-making bots. So when a trade is not matched against the Polkadex order book, the Polkadex Engine will check if these on-chain bots can make an order that will match. With a trade executed only if a better price is provided by the bots, otherwise, it’s inserted as a market-making order in the order book. This helps to ensure that there are no price slippage issues for traders and in the first version, Polkadex will focus on having a constant product market-making bot. As it stands now, Polkadex will be looking to launch that Mainnet in September-August 2021. The Polkadex Orderbook will keep the convenience of a centralized exchange, but drop some bottlenecks by decentralizing the custody of all assets. Implementing a Trusted Execution Environment (TEE) on top of Polkadex. This mechanism allows an Operator to maintain the Orderbook and necessary control mechanisms needed, but can’t cheat the system when the results produced by the TEE contain cryptographic proofs. In the event of any tampering, the blockchain will invalidate the proof and not accept the tampered state submitted by Orderbook Operators. The funds of the user always stay in the native blockchain and are controlled only by the user’s private key. This Layer-2 solution only allows placing and executing trades but not the ability to transfer any balances. It additionally ensures that only the trader’s private key can start a balance transfer. In the final build, additional features will include a Crowdfunding Platform, Parachain Auctions, Margin Trading, Lending, Futures, Options Trading, and the ability to perform 500,000 transactions per second.
Aside from the built-in AMM bot, a Polkadex Fiat utility will make it stand out from the competition. With Polkadex Orderbook being a viable decentralized exchange for users who are already onboarded into crypto through traditional finance bridges. Due to the no-KYC policy, none of the current DEXs supports fiat, limiting access only to us crypto holders already in the system. Polkadex will be one of the first projects to offer fiat support on a DEX, due to a pretty cheeky Decentralized KYC process. Knowing your customer is essential for allowing institutions to take part in trading, being regulated entities. Without creating onramps for them, it’s not possible to take the idea of peer-to-peer trading on DEXs to a mainstream audience. Polkadex’s solution is by using cryptographic proof instead of an actual user’s data to verify that the participant is not sanctioned by Anti Money Laundering or involved in other financial crimes. Since blockchains are already using ‘proof of identity’, the user’s personal data always remains with the user in their non-custodial wallet. This means that the data is never exposed to any third party, and users remain in full control of their data. Removing the risk of data leaks or hacks. However, De-KYC will only be required for users whose trades exceed a certain limit. The exact limits will be enforced by crypto regulations under the Republic of Estonia, where Polkadex is registered. Users will store their KYC data in a wallet provided by the KILT Blockchain and expose it only to their preferred KYC attester like Fractal. The chosen attester will then issue a cryptographic proof to KILT. With Polkadex receiving only the zero-knowledge proof of identity. This way user data is exposed only for the verification process and remains in the user’s wallet the rest of the time. By participating in De-KYC you’ll be able to buy crypto on the platform with a credit card or bank account, and receive IDO/IEO tokens into your wallet without manually moving funds after participation.
Polkadex’s native token is PDEX and used for paying transaction and trading fees, participation in Polkadex IDOs, Governance, and staking to become a Validator. The Total Supply of PDEX is capped at 20 Million. But, the supply can fluctuate at times with the token being inflationary. Through a system of burning tokens, the supply can move between 18 Million and 22 Million tokens at certain periods. But will always come back to the fixed 20 Million tokens in total over the long run. Of the total supply, 2% of tokens were released for the Community Round as a part of the Token Generation Event through IDO & IEO earlier last month. Of the remaining supply, 9% went to the Founders and Team with 20% initially unlocked 12 months after the Mainnet launch and the remaining vested quarterly. Seed Round received 7%, Strategic 8%, and Private 10% with all having quarterly vesting schedules. The Treasury received 41%, Parachain Auctions 10%, Advisors 6%, and Marketing 7%. There are currently only 1,963,860 PDEX tokens released as ERC-20 tokens and less than 10% of the Total Supply. With Polkadex being in the Testnet phase it makes sense to release a limited supply of tokens. The remaining tokens will be minted in the Mainnet and distributed in tranches at later stages of the product launch and why quarterly vesting schedules have been put in place for all early investors.
Polkadex is registered in Estonia as the private limited company Polkadex OÜ. Co-Founded by COO Deepansh Singh as his first startup right out of college. He’s joined by Co-Founder and Executive Director Vivek Prasannan, CMO Kseniia Baziian, CEO and Acting CTO Gautham J., Economic Advisor Matthias Hafner, and independent Rust Engineers Mambisi Zempare, Ayush Mishra, Krishna Singh and Frank Li.
To help bring their vision to life the team has partnered with Zurich-based Supercomputing System AG to help build the SubstraTEE. A Trusted Execution Environment on Substrate with a framework for allowing calls to a custom state transition function (STF) inside a (TEE), namely an Intel SGX enclave to provide confidentiality and integrity in all transactions. Through a partnership with Fractal, all 140,000 DID users on the platform were automatically issued their KILT credentials in preparation of the Mainnet launch this year. Before TGE Polkadex contracted two separate audits from independent firms Omniscia and Halborn before any tokens were released.
Since the TGE on April 16th PDEX has performed as most of the projects we discuss in their first few months. Coming to market at $14, PDEX had its first 24hr period rally to almost $40, and then slowly dropped off, bouncing between $20 and $30 before falling to $15 levels. This month PDEX got a bump exactly 30 days after TGE that saw it jump back up to $40 and then back down to $15 where it sits currently after last week’s altcoin bloodbath. In general, this has all played out with minimal Daily Volume for PDEX with the most recent rally from $15 to $40 with less than $10 Million in Daily Volume between Kucoin and Uniswap. The PDEX token currently sits at just under $35 Million USD in Total Market Cap. Polkadex has an active and engaging community of 16k on Telegram and 40k followers on Twitter. In the projects Github, three individuals have been working on a fairly consistent basis since launch.
Nothing that’s set off any major red flags while looking over this week’s project. That is of course if you overlook the fact that there’s really no platform yet, and somewhat limited prior blockchain experience in the team. While the project seems intent on keeping their current timeframes for Mainnet. This will all depend heavily on Polkadot being operational at that time.
Polkadex has a pretty clear goal of what they’re looking to do with the Polkadex Orderbook. While I’d love to say it’s the first time an idea like this has come along, it’s just not. But, what is a first is their Segway into the Polkadot ecosystem and first in line to provide a DEX that meets the needs of everyone. Having Polkadex Fiat on/off ramps will be a crucial element to its success as the AMM bot is not enough alone to set it apart from coming competitors in the Polkadot Network. With a promise this big I certainly hope that Polkadex can pull through and bridge decentralized systems with traditional finance. While not a lot of attention is on the project at the moment. The short supply has reflected price action from even the smallest amount of liquidity, and something to keep a close eye on as Polkadot Mainnet becomes more of a reality.
Until next time, remember that the only guarantee is BTC. So keep stacking that Satoshi.