DEX Portal to Bring Multichain Exchange Without the Need for Wrapped Tokens

DEX Portal is bringing multichain cross-exchange without wrapped tokens

DEX Portal is bringing multichain cross-exchange to the DeFi ecosystem. According to Vitalik Buterin, most cross-chain bridges are particularly susceptible in 51% of assaults. It is neither trustless nor decentralized to lock and wrap money onto other chains. Portal, a real cross-chain DEX based on Bitcoin (BTC/USD), thinks wrapped tokens and third-party asset custody will have no place in the future. Only during trade execution should users’ assets be locked.

Bridges are difficult to understand and secure. Wrapping assets on other chains effectively inherits an IOU’s assurances. It becomes challenging to safeguard user cash when hundreds of millions or billions of dollars are held by poorly constructed systems and custodians with unproven security methods. Security is critical because the “code is law” nature allows hackers and attackers to get away with almost anything. We prefer simplicity and trusting established, long-lasting contract types and transaction models, like Bitcoin’s, over various experimental approaches to real-world money.

Portal is creating DeFi on top of the Bitcoin blockchain to provide various DeFi services while keeping anonymity inside open and transparent marketplaces. Coinbase Ventures and other big-name investors fund the startup. Thanks to the Bitcoin network’s strong security, its Layer-2 and Layer-3 technologies enable zero-knowledge cross-chain swaps and censorship-resistant communications. Portal removes the need for wrapped currencies (wBTC and wETH) or dangerous staking with intermediaries.

The Rise of Cross-chain trading solutions

The three main components of the decentralized finance (DeFi) market are permissionless trading, permissionless marketplace development, and permissionless market-making. The final two are essential for the DeFi derivatives market to grow successfully and boost liquidity provider profits.

Permissionless trading has been the most widely adopted so far, owing to the development of on-chain Web 3.0 wallets and their adoption by almost all DeFi protocols. Automated market makers, on the other hand, provide decentralized marketplace creation and market-making as relatively new capabilities (AMMs).

However, AMMs have not resulted in similar decentralized marketplace building and growth in the spot and derivative markets. A market for any asset paired with any other asset may be constructed on the spot, and if no such pair exists, a swap can still be completed by routing via an intermediary asset like USDC. Consequently, the market for tokens is customizable and straightforward to implement.

In the derivatives market, however, this is more challenging. As a consequence, a wide range of techniques has been created. One option is to use a virtual liquidity machine to build an immortal on-chain liquidity product that can provide both long and short liquidity. This strategy removes liquidity provider problems by eliminating the liquidity provider (LP) from the equation. The risk is now shifted from the LP to the protocol.

The key to permissionless derivatives is that LPs can use a liquidity provision strategy. The derivatives liquidity problem would be solved if a protocol could answer the product-market fit challenge. Perpetual products include inverse contracts, which are a kind of perpetual product. Instead of depending on stablecoins, they enable dealers to trade their tokens. LPs, on the other hand, may provide liquidity.

Inverse perpetual may be used to grow the DeFi derivative market. They allow for the development of external contracts in any asset, from stablecoins to crypto-assets, LP tokens to index assets, as long as a price oracle is available. For example, protocols DAOs have built a strong use case for LP tokens in DeFi 2.0. Accepting all crypto assets in derivatives is on a similar upward trend.

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Image credits: Luca Bravo.