Can someone explain what the point of these are? I was excited about it first because I thought I could actually trade different cryptocurrencies, like buy ada for ethereum or something similar… That however, don’t seem to be the case…
While most trading platforms on Cardano are just a few months old and are still in a stages of developing and building out, there are already some that provide such options. You are able to buy/sell ADA for Eth or Bitcoin on WingRiders DEX
or on MuesliSwap -Milkomeda side chain you can trade ADA for Eth, BTC, Avax, etc…
They are ‘wrapped’ so if you want to use them on Ethereum or Bitcoin network you would have to go trough the process of unwrapping. However, as long as you stay on Cardano network you can trade Eth with out high fees.
The main reasons are:
- To establish trade of Cardano native assets. There are 100’s of them so far. Just look at the list on MuesliSwap MuesliSwap | The First Cardano DEX
- To allow for more efficient price discovery and liquidity of such assets.
- To aggregate and provide info and stats on such assets.
- …and eventually to establish connections to all (viable) crypto chains.
Just having a DEX/Swap doesn’t mean instant profits. Just like having a stock exchange doesn’t mean that all people in that city suddenly get to have yield on all their money. It is just a tool to use. You still need to be capable to invest/trade profitably in order to make more then just 4%-5% you get from staking. You need the same skills that any investor would need.
Just because this is crypto doesn’t mean that it bypasses the need for risk management, analysis and financial planning. You can still loose and make bad choices same as in any market. Existence of DEX/Swaps will not make that disappear.
However, existence of DEX/Swaps will provide liquidity to Cardano projects. They will extend the growth and utility of the whole network. As well as provide tools and opportunity for those that know how to trade and are willing to take risks with their ADA with a chance to participate in that growth trough profit on appreciating assets.
Also, DEX/Swaps will make it easier to spot fakes/scams and disseminate info about them. Such as this example:
So, don’t get discouraged due to lack of clarity or hype. Just pick what you like to invest in and learn as you go along. Maybe learn about projects that you can invest in or how to use liquidity pools and farming, or maybe learn how to trade using technical analysis. As your knowledge base increases you will see a lot of opportunities in these Dex/Swaps as they are now, even thou more is coming.
Personally, I like to find a project that I like and learn a lot about it, so when I invest I’ll know when to get out/cut losses and when to take profit.
If you use liquidity pools I would recommend WingRiders. They seem to have the least amount of “impermanent” loss on pool vs pool basis (from my experience).
If you trade other cryptos make sure you define all your entrance and exit points before you risk your ADA.
…and if you are not sure, just remember staking ADA will give a yield better then any bank. So, no need to rush into anything.
DEX stands for decentralized exchange. The main purpose is to allow peer-to-peer trading of cryptocurrencies directly without a middle-man. Theoretically I could use a functional DEX to offer fungible tokens for ADA and if you offered ADA for an amount of that exact token it would match us up and make the swap automatically via a smart contract.
This can be favorable for a variety of reasons:
- The token is too new, unpopular, or risky to be listed on highly regulated centralized exchanges. Some trading pairs will simply never be listed on FTX because they have to play nice with governments.
- Avoiding fees like ETH gas or Coinbase extortion. DEX trades are typically cheaper because it’s like going to a yard sale instead of a retail mega corporation.
- Less requirements for KYC and regulation allows people in iron fist / authoritarian countries to actually participate (not advising breaking any laws in your country, seriously just move someplace that doesn’t suck if you need VPN, proxies, and TOR to do anything)
This can also be horrific for a variety of reasons:
- Scams, there is no customer support or anyway to undo swapping your ADA for “Rolex” tokens.
- Slippage happens when available tokens and liquidity is low or trading volume is high causing prices to become very volatile.
- Congestion and bugs can cause failed or slow transactions (ADA), front running (ETH), crashes and outages (SOL), etc, etc
That last one is actually the biggest drawback. There is no “stop” or “freeze” button if the DEX is truly decentralized so when things explode you have to just sit back and wait for the fireworks to be over and hope you still have gun powder afterward whereas when things go sideways on a centralized exchange they just turn off trading/withdrawals/deposits/etc temporarily and refund everyone once it gets sorted out.
For the DEXes already live on Cardano, this seems to be only partially fulfilled in my perception.
You can interact with, I think, all of them, only through their centralised websites. How exactly their contracts work, is poorly documented. I wouldn’t know how to cancel, get my assets back, if they go south, while assets are locked in their contracts.
I think all of them require that some “scoopers”, AMMs or whatever they call them, do the actual swap transactions and that function is, again: I think, not open to anybody (and also costs a bit of a fee). So, it’s still not that directly peer-to-peer.
In the case of SundaeSwap we can give a resounding golf clap for basically re-inventing the AMM functionality of Ethereum on Cardano but the innovation is mostly “holy plutus, it actually works” at this phase. Which as many of us know is a monumental feat in and of itself given some of the hurdles both real and imagined.
The decentralization of quite literally all DEX, DAPPS, D(etc) is far from the ideal and I mean that everywhere not just on Cardano. I would give top marks for Cardano staking. It is by far the best proof of stake algorithm and blockchain in existence. The ability to delegate without locking tokens, the incentives to become a SPO, etc is why there are over 3000 block producing nodes and even more relays available.
However the leaders in smart contract platform, speed and performance, lowest fee structure, third party developer tools, etc are currently elsewhere. That said Cardano is still in my personal top 3 list and I am still making progress developing my hobby project here with no intention changing course
I would like if it would become best practice in Cardano to have open, truly decentralised smart contracts.
Contracts with documentation how anybody can do any transaction on them with just
cardano-cli or similar.
But it would make it much harder to build opportunities for profit, “scooper fees” and stuff like that into them.
Ok then, So, what actually is a “native asset” and why does it have value? Take, lets say “MILK” that you can trade on sundaeswap. Why does “MILK” have value? and why should I swap my adas for it… I understand how a blockchain like cardano have value… not so much how these many many different native assets can.
It depends on what Milk has to offer.
Would you ask the same question about USDT? It is just an asset on ethereum chain.
Basically, it is a kind of black box. It is about giving up control over one’s ADA without knowing exactly what will happen to it at least temporarily. I think the network thrives on the fact that participants should be aware that it’s not just about generating returns, but also about participation. For example, I wouldn’t sell or lend my right to vote as a citizen - that may seem a bit exaggerated as a comparison, but it makes clear what it’s all about, power and influence, and that this is an important field of activity for the future.
Much more serious this is already the case with Exchanges (i.e. EX instead of DEX) see Binance: Your ADA account will be reduced accordingly during the locking period in “Binance-Staking”, i.e. they can do what they want with your ADA, black box. I’m afraid that Binance might even vote or even do it already, am I wrong in assuming that?
At least more transparency in this field should be claimed - I agree 100% with that.
Native assets on Cardano can literally be anything.
I can go mint a billion “KICKASS” tokens right now for next to nothing (a few ADA and some know-how) What makes these KICKASS tokens interesting or valuable is what can be done with them. If that is literally nothing other than participating in an ICO or buying them on a DEX then you probably just got scammed out of some ADA.
Similarly if I mint thousands of NFT for a small handful of ADA and you buy them for XX+ ADA a pop you are probably assuming that a link to a random JPG which may or may not even exist in the future is going to be more valuable than XX+ ADA at some point. Ideally ADA itself will also be more valuable as well making this gamble more lucrative.
In conclusion with anything you are willing to buy there needs to be a reason. If you do not know with certainty what that reason is than the only logical or sane reasoning would be to NOT buy it at all. If the project is compelling (actually compelling not just marketing hype, promises, or undisclosed claim to fame) then you can roll the dice as you see fit.
In short, gamble responsibly?