A decentralized exchange developed in the Liquid Network will open for early access on Monday.
Called TDEX, The project has announced the entry into an open alpha phase. Sevenlabs is developed A company that provides consulting and private label services in addition to its current operations.
The exchange offers a unique twist to automated market makers (AMMs) who are currently dominating the volume of exchanges on the chain. The TSWAP protocol used by the exchange focuses on ad hoc atom swaps, which allow operations between two counterparties to be carried out without a middleman.
Unlike MMAs, there are no math formulas here that enforce a specific price. As Claudio Levrini, CEO of Sevenlabs, told Cointelegraph: “TDEX gives the liquidity provider full control over using a fixed price strategy or adding external prices and custom trading logic.” The other side of the coin is that providing liquidity on this platform may be more complicated than on other platforms like Uniswap.
Atomic swaps are often suggested as a decentralized method of trading assets in Bitcoin and other UTXO blockchains. Although acceptance has so far been limited, the proposals by Taproot and Schnorr could enable simpler mechanisms through adapter signatures.
Adam Back, Blockstream CEO said that “TDEX is an exciting example of the growing number of DeFi solutions emerging in Liquid, or as we like to call it LiFi.”
However, the relative degree of centralization in liquid has come under fire in the past, particularly in the context of Introducing concepts traditionally associated with Ethereum, such as non-fungible tokens.
Liquid is a bitcoin sidechain that relies on an association of “officials” to secure a fixation with Bitcoin and validate the network. These officials are Bitcoin-related trading companies, mainly exchanges. The association and the design of the connection system represent an important point of trust within the network. As an inconvenience in June, Blockstream briefly made the sole controller of 870 BTC in the network’s reserves.
Some members of the Bitcoin community often push for a “Bitcoin DeFi” project to be created This could open the network to the world of decentralized trading and lending, which so far has mainly been seen with Ethereum.
Nuclear loan is currently between the only projects that use native bitcoin as collateral for loans, although it uses Ethereum for the rest of its logic. Other “Bitcoin DeFi” projects are MoneyOnChain, an analogue of MakerDAO at RSK, and now TDEX.
None of these projects are being developed natively in Bitcoin, largely due to the limitations of smart contracts. The same restrictions make it difficult to create trustworthy bridges to the leading cryptocurrency blockchain, forcing sidechains to adopt federation mechanisms.
However, the demand for Bitcoin in the DeFi ecosystem is clearly huge, as the success of WBTC has shown. There is more Bitcoin is locked together in Ethereum as the Liquid and Lightning Network. It remains to be seen whether DeFi’s demand for Liquid will be that great.