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Decentralized Finance Revolution, What Is Dexalot?

4 mins
Updated by Shilpa Lama
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Even though AMM-based trading has picked up recently, most digital assets are still traded through centralized black-box exchanges

The unfortunate reality is that most new cryptocurrency users must trust these old-fashioned centralized exchanges as their initial foray into cryptocurrencies. Such exchanges have had a history rife with problems ranging from market manipulation to hacks, as well as problems with asset withdrawals, arbitrarily disabled deposit functions, etc. This circumstance is not ideal and negatively impacts the adoption of digital assets.

Dexalot is a marketplace built on the Avalanche protocol, the fastest and the most innovative blockchain technology.  It aims to solve these primary problems with centralized exchanges by eliminating the custodial relationship between the user and the marketplace and providing a level playing field for all traders through decentralized trading.

So how does it work?

Unlike traditional AMMs on Avalanche (which primarily provide swapping functionality using a constant product formula), Dexalot natively supports a full central limit order book, which allows users to enter orders at prices they are willing to execute at.  Such orders eliminate the concern for price slippage on executions and the potential risks of being front-run during a trade.  Further, market orders (to be enabled on Dexalot when appropriate liquidity is achieved for any given pair) will allow users to receive the same price-time priority execution they are accustomed to on centralized exchanges.

Dexalot’s user interface (UI) also aims to offer the familiar look and feel of centralized exchanges.

Transparency is important. All orders (and canceled orders) placed on the Dexalot UI are recorded directly onto the blockchain and displayed on the central limit order book. This allows all users and observers to receive the same level of transparency regarding activities on the blockchain. Dexalot aims to eliminate the need to trust a central institution or counterparty and inherently creates a more level playing field for all users regardless of their size and sophistication. 

By combining the transparency and power of a central limit order book with the speed with which Avalanche finalizes transactions, Dexalot aims to revolutionize the trading of digital assets with the goal to move market share away from centralized exchanges.

Why is Dexalot positioned to be the primary exchange of digital assets?

One of the biggest advantages that Dexalot, and frankly the entire Avalanche community, has is the Intel SGX-supported Avalanche Digital Asset Bridge.  This bridge between the Avalanche and Ethereum blockchains has allowed DeFi enthusiasts to bridge around $5.89 billion worth of assets into Avalanche to date.  While the bridge currently is only supporting Ethereum and Avalanche, the technology allows for bridging other blockchains as well.

The many planned innovations beyond the current bridge and the consensus algorithm for Avalanche, combined with Avalanche’s inherent speed (faster trade settlement times) and efficiency (lower transaction fees), put Dexalot in a prime position to capture market share from centralized exchanges.

This is not even accounting for Dexalot’s plans to migrate to its own subnet, which will further increase transaction speeds and lower fees.

Why is Dexalot building on Avalanche?

While the previous paragraphs have already touched on this topic briefly, this answer certainly deserves a section of its own.  Dexalot believes that Avalanche is currently the fastest, most decentralized, and fastest-growing blockchain out there. Dexalot’s goal is to leverage all the key achievements of Avalanche, such as quick finality, high capacity, wide decentralization, and data immutability, to provide the best possible central limit order book experience.

Currently, Avalanche already has over 1,100 validators. In just the last 24 hours (November 16, 2021), 482,000+ transactions took place across the X and C Chains. Hypothetically, if one were to perform the same number of transactions at the exact same time on Avalanche, it would only take less than 2 minutes to complete, based on an estimated 4500 TPS provided by Ava Labs.  This implies that the current usage on Avalanche doesn’t even come close to full capacity.  Also, this 4500 TPS figure was based on testing that was performed prior to the mainnet launch.

Who is backing Dexalot?

Dexalot is the first recipient of funding from the Blizzard Fund (even before the Fund was publicly announced!).  The seed investment is a testament to the commitment of the investors to growing the Avalanche ecosystem.

The Blizzard Fund is comprised of highly regarded investors and institutions with the goal of developing and supporting the Avalanche ecosystem.  The investors that are part of the Blizzard Fund include, but are not limited to, the Avalanche Foundation, Ava Labs, Polychain Capital, Three Arrows Capital, Dragonfly Capital, CMS Holdings, Republic Capital, R/Crypto Fund, Collab+Currency, Lvna Capital, and FInality Capital.

Emin Gun Sirer, Founder of Ava Labs and Director of Avalanche Foundation, said, “The last two months have shown incredible growth across Avalanche, with users, assets, and applications joining the community in record-highs. Blizzard will play a key role in further accelerating this growth, and solidifying Avalanche’s position as the premier home for projects and people pioneering the next era in our space.” 

Dexalot proudly thinks that it is one of these pioneering projects in the Avalanche ecosystem.

Dexalot Fuji testnet results and recap

Dexalot deployment in Fuji has provided the team with ample data. Their unique 12,000 wallets have connected to Dexalot – they believe these to be unique users since Dexalot hasn’t yet published the necessary tools and documentation regarding automated connectivity into the smart contracts.

Beyond the unique wallet count in Fuji testnet, Dexalot has seen over 288,800 total transactions on-chain and $42.1 million in volume to date, surpassing volumes at some smaller centralized exchanges.

While these are all test network data, Dexalot aims to be the product that finally disrupts the balance of power and brings all the benefits of decentralization, immutability, and censorship resistance to users.

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