DeFi may have cut out the middleman, but it did so at the cost of higher transaction costs and reduced functionality.
The decentralised finance (DeFi) industry is continuing to achieve new heights, with daily transaction volumes rising on a regular basis. Unfortunately, despite the billions of dollars now being transferred, decentralised exchanges (DEXs) are burdened by visible and invisible expenses that stifle market activity.
As a result, the future of DeFi necessitates the abolition of traditional DEXs’ high transaction fees and restricted functionality. Slippage, the discrepancy between a cryptocurrency’s quote price and the trader’s real paid price, is one of them. In addition to restricted liquidity, high gas costs, a lack of control over execution price, and the risk of front-running, which occurs when malicious traders place a transaction ahead of a trader based on insider knowledge of their future trade, there is also the risk of front-running. DeFi could attain equivalence with centralised exchanges (CEX) while eliminating the need for middlemen if these challenges are addressed.
In terms of order book functionality, for example, centralised trading systems usually sort limit orders by price, from highest to lowest. To use BTC/USD as an example, the order book will contain all of the purchase and sale orders that have been made on the exchange at various (limit) prices.
Users may discover the highest bid for BTC at the top of the book, and the lowest ask prices at the bottom; the centre of the book, where bids are closer to asks, will assist determine when a new market order will be executed. When a market trade exceeds the amount available at the first level of the order book, or when the bid and ask prices change before the exchange can execute the market order, slippage occurs. Slippage occurs when a trader pays more for their order than intended.
All DEXs on DeFi now only support market or spot orders, which means that when a trader swaps, they are at the whim of market conditions, which they have no influence over. Given the market’s often tremendous volatility, this problem is becoming more important in DeFi.
To reduce the impact of volatility, investors that use centralised exchanges will frequently place a limit order, in which the required target price is pre-set as a transaction condition. The benefit of a limit order over a market order grows as the size of the order grows. Unfortunately, completing a trade of this nature in a decentralised system was previously impossible.
Human-driven to computer-assisted
DeFi systems presently only support market orders and do not support order books or limit orders. To users’ surprise, DeFi platforms’ “limit orders” are simply executed as delayed market orders, with all the fees and inefficiencies it entails. Limit orders have been missing on decentralised exchanges, despite the fact that they are the pillar of centralised exchanges, attracting significant human labour to enter and execute them.
DeFi’s appeal is to democratise market-making on the blockchain by allowing anybody to generate their own liquidity and let anyone else to submit a buy or sell order through automated smart contract-operated trading networks, ensuring that all traders are treated equally. However, until now, allowing traders to specify their goal price while avoiding slippage and other charges has been difficult with DeFi.
DeFi platforms have often only enabled minimal automation using smart contracts, despite their best efforts. DEXs set up buy and sell orders, match and process deals, but when it comes to liquidity, they fall short of what customers have grown to expect from a centralised exchange. As a result, if DeFi is to become a viable alternative to traditional finance, a solution based on real-time order books is required.
Getting rid of DeFi trading fees for good
Traders can finally eliminate the fees of dealing on standard DEXs by employing a DeFi order book, which is entirely automated and decentralised. CivTrade’s patent-pending technology allows anyone to take advantage of DeFi’s benefits while retaining equivalent to the functionality available on centralised exchanges like Binance, with zero price impact, zero fees, and even giving traders earnings while their order is open.
Investors can use the CivTrade DApp to execute market trades as well as limit orders at their selected target price, all without the slippage, liquidity fees, or other negative price consequences that other DeFi platforms have.
CivTrade’s implementation of a one-sided liquidity pool for each transaction supports over 4,000 tokens on the Ethereum (ETH) blockchain and 1,000 on the Polygon (MATIC) blockchain, as well as eight wallet providers; traders can be confident that each trade is centred at the exact target price, regardless of their preferred pair or price. This not only saves money, but it also compensates traders for their liquidity. The DApp has already transacted $10 million as a result of the carefully built system design, with an average gain of $1,820 per transaction when compared to using a centralised exchange or other DeFi platforms.
“DeFi is the future,” the Civilization team says, “and CivTrade permanently eliminates the need for any market-making or OTC desks.” CivTrade marks the turning point when DeFi anybody can finally achieve what a trading centralised exchange used to offer, but better, faster, and cheaper, by automating the order matching process with a scalable, anonymous solution at zero cost to traders.”
In what the team can only describe as an engineering “mini-miracle,” the team has subsequently released CivTrade ProView, which has the capacity to turn DEX data into actionable insights. Users can take use of an automated order book, interactive charting, and live order execution with ProView.
CivTrade is only the first of Civilization’s planned goods. CivFarm and CivFund are two upcoming projects that will boost DeFi accessibility even more.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.