TiDefi CEO on Improving the Trading Experience on DEXs

Decentralized exchanges (DEXs) and decentralized finance (DeFi) are a relatively recent type of financial system that operates on a decentralized, community-driven model, with no central authority controlling it.

Today I'm speaking with Daniel Elsawey, CEO & Founder of TiDefi, who will share their insights and perspectives on the DeFi space. We will discuss the importance of user-friendliness, liquidity, low fees, and the overall trading experience for DEXs, and how they contribute to the growth and development of the DeFi ecosystem. 

We will also explore the challenges and limitations faced by DEXs and the innovative solutions developed to overcome them. So let's get to it and learn more about the exciting world of DEXs and DeFi trading.

Tell us about yourself and what you do.

My name is Daniel Elsawey, and I am the CEO and Founder of Tidefi. I've been in the digital assets space since 2016. I lead our team at Tidefi in building a real-world tokenized asset platform, including our DEX (Tidefi) and blockchain (Tidechain) built on Substrate.

What brought you to the blockchain industry?

I had seen sparse news items on Bitcoin in 2013/14 but have yet to dive down the rabbit hole. Then around 2016, when I was working in the FX market and discussing hedging risk for corporates, I started to read further into Bitcoin and the concept of it being a store of value. After delving deeper, it seemed we were at the beginning, at least from an institutional level, of something fascinating. 

Why do you believe user-friendliness is crucial for the mainstream adoption of decentralized exchanges?

Right now, the decentralized exchange market consists of some great ideas and venues doing substantial volume, but it is limited to the crypto-savvy community segments. Moreover, user interfaces and strange terms such as liquidity pools and farming are off-putting for the average user. The real gem hidden with DeFi is not the complexity of these features. 

It's about using this underlying tech to present an experience where users have 1. More control of their assets 2. Real-world use cases in their day-to-day lives, and 3. Democratizing access to assets previously only available to High Net Worth or Institutional participants via their Private Banks or Brokerages. 

A large section of the economy has realized that saving for retirement does not work with current asset prices and inflation. Instead, they want access to ecosystems where they can take control of their future through financial empowerment. 

Can you explain how decentralized finance (DeFi) enables greater financial accessibility and inclusion?

DeFi protects the user from counterparty risk, which centralized finance does not. Everything is on-chain and transparent. While using the ecosystem to gain access to exciting projects and rewards, the user can also support the network. The user can support the infrastructure of a blockchain ecosystem by nominating a Validator and getting returns back. 

What are the main advantages of using a decentralized exchange compared to a centralized one?

Eliminates centralized counterparty risk that has plagued centralized exchanges, especially with the recent news over the past year. Users can control their funds and get access to other investment opportunities by nominating and supporting networks to provide liquidity for pricing. 

The extension to this is the ability to now access the businesses you demand to interact with without any middlemen or third parties charging a fee in the process.

Can you explain the concept of "wrapped assets" and how they enable cross-chain trading?

A wrapped asset is an asset that is not natively supported on a chain. Still, instead, a new token that is compatible with that chain is supposed to be backed 100% by the original underlying asset. An example would be Bitcoin is not natively compatible with Ethereum. 

However, wBTC, wrapped in Bitcoin, is built on ERC-20, which works on the Ethereum network. So, users deposit into a centralized custodian account BTC and can get wBTC 1:1 to use on the ETH network. Wrapping has been one mechanism for using different crypto assets cross-chain, but it has risks.

How do decentralized exchanges plan to compete with centralized exchanges in terms of user experience and trading features?

A couple of projects are already refining the DEX user experience to make it easier for the average user to get into DeFi, Tidefi included. I can see over the coming years that more market share will be taken away from CEX and move into DEXs. One of the main barriers to entry remains regulation, KYC/AML, and fiat onboarding for actual mass adoption.

How can decentralized exchanges plan to attract more liquidity providers and traders to their platforms?

DEXs need to start to offer unique products that are not available on CEXs. By this, I am not referring to listing more of the over 1000 tokens in the market but using DeFi to offer real-world tokenized products with businesses behind them, generating revenues. 

The tokenization should be done on a public blockchain that can handle trading on Layer 1 and give users access to daily rewards and yield from businesses they use. 

An example is ATH Vodka, a premium Vodka brand that has an exclusive partnership with Tidefi to bring the ATH token to their users to allow VIP access to club events, concerts, and users can even visit the distillery and help work on a new upcoming flavor. 

When you think about real day-to-day use cases, we envisage a tokenized ecosystem of businesses where users can exchange premium access to different products on demand to suit their lifestyles. True utility powered by DeFi.

How can decentralized exchanges stay relevant and competitive as the DeFi space evolves?

I believe a DEX, which offers to swap and to stake in liquidity pools, will need to adapt and start thinking about real-world adoption. The top DEXs have been successful with first mover advantage and using AMMs. 

Still, once a user already has an account on a centralized exchange and has tried some yield farming on a DEX, there isn't a real reason to keep using the DEX, especially in a bear market where asset prices are low. So instead, DEXs should connect with traditional finance in a more symbiotic relationship and embrace regulation to reach a broader user base.

How can decentralized exchanges handle the issue of smart contract vulnerabilities?

This is a tough question to answer simply. As the amount of assets continues to increase on DEXs, the reward for attackers also increases. Therefore, it's impossible to eliminate the possibility of vulnerability. However, some good practices DEXs can use are to get audited frequently by respected security firms in all aspects of their product. 

For example, there have been a lot of hacks recently on cross-chain bridges, some of which could've been avoided with more thorough auditing. In addition, not blindly integrating third parties without proper analysis of their code repository would also be prudent in protecting against vulnerabilities.