What does TON's DEX still need compared to Ethereum and Solana?

Trading is the absolute core of the Crypto world, but the channels through which trading is completed vary greatly in the eyes of different practitioners.

In centralized exchanges, they almost carry the entire industry's trading liquidity, with platforms operating efficiently in a centralized model, offering high matching efficiency, good trading depth, and fast transaction speeds.

However, for the native world of public chains, decentralized exchanges based on smart contracts are the core of trading on the entire chain and the liquidity core of on-chain businesses. The token listings and trading rules of decentralized exchanges maintain the permissionless trading characteristics just like public chains, forming a stark "threshold" difference from centralized exchanges.

If we look at each public chain individually, there will be a core decentralized exchange that activates the business and ecosystem of the entire chain. We have even seen a "full chain of token business" built around DEX on Ethereum and Solana.

In this cycle, the TON public chain has gained fame, but the ecological construction of TON is still very early. The DEX applications on the TON public chain are overall "few and functionally simple." Compared to the mature Ethereum and Solana, how should DEX applications on TON develop?

Mature DEX on Ethereum and Solana

Undoubtedly, the most mature DEX development currently exists on Ethereum and Solana.

Ethereum's DEX benefits from the long-standing development of Ethereum DeFi, while Solana's DEX development benefits from the chain's performance and ecological heat, with DEX trading volumes once reaching a level comparable to CEX.

Next, let's look at the DEX development on both chains.

The earliest DEX on Ethereum was Uniswap, which pioneered the AMM model, providing liquidity for trading pairs of two tokens through a proportionally invested token pool. In the iteration of Uniswap applications, V1 was the simplest AMM version, V2 optimized trading matching and LP functions, and V3 introduced the ability to provide liquidity within a fixed price range, starting to offer friendly support for professional liquidity providers, which is also the currently running version. Additionally, V4 is being developed to implement features like limit orders.

From the changes in iterative versions, Uniswap continuously upgrades to provide more mature asset management functions for LPs while ensuring smooth user trading. This represents the optimization direction of DEX.

In addition to swap and AMM LP, Uniswap has also achieved great success in DEX business.

First is MEV. The AMM pool's prices change dynamically with the token ratios during user trading, creating arbitrage opportunities during the AMM pool's trading matching process, which can also affect the price readings of other on-chain applications.

Therefore, Uniswap has a natural advantage in MEV and Oracle.

In terms of MEV, Uniswap maintains a certain level of MEV resistance to guard against sandwich attacks and higher transaction slippage caused by MEV.

In terms of Oracle, DEX is almost the fastest price source for trading pairs and the most comprehensive data source for trading pairs, which has led many DeFi protocols to choose DEX oracles based on Uniswap for direct pricing instead of external oracle solutions like Chainlink. This allows DEX to incorporate "oracle" capabilities as one of the output capabilities in other DeFi data modules (such as lending protocols and derivatives trading markets).

Uniswap represents DEX, but the refined functions needed in DEX business are supplemented by other DEX. There are many types of DEX on Ethereum, such as Balancer, Curve, and Sushiswap, which have been developed for many years, as well as aggregator DEX like 1inch, MetaMaskswap, and Matcha.

Among them, the emergence of Balancer has made DEX a more refined liquidity center for on-chain applications. First, Balancer proposed management of liquidity provision: liquidity pools with different weights and multiple tokens, boldly changing Uniswap's equal-weight liquidity pools to customizable ratios and multiple tokens, which is beneficial for projects to manage liquidity supply and market capitalization. Furthermore, Balancer has changed the Launchpad's purchase rules to the more user-friendly LBP rules, altering the impact of AMM pool front-running on trading prices.

Curve primarily presents the market for on-chain stablecoin trading, mainly providing trading liquidity for various stablecoins and pTokens. Stablecoins and pTokens are essentially intermediaries in the DeFi trading process and are essential for on-chain trading and business realization, with some even serving a buffering role in the token's economic mechanism.

Looking at DEX like Balancer, Curve, Sushiswap, and DODO, aside from trading swaps, another important business is providing staking pools for LPs and various tokens to achieve asset compounding. These DEX not only aggregate AMM LP liquidity but also play a supply chain role for applications like DeFi.

In summary, we can clearly see a mature chain developed based on DEX on Ethereum. However, the transaction confirmation speed on Ethereum is slow. When transaction confirmations are fast enough, or when on-chain data feedback is quick enough, corresponding businesses may switch to another development form, such as Solana.

The DEX on Solana differs from Ethereum in that the experience is almost identical to CEX, and if transaction confirmations are fast enough, the roles of DEX and aggregators become consistent. At this point, what DEX cares about shifts from "everything is on my platform" to being more concerned about "where are the trading pairs and corresponding LP pools."

Thus, support for LP becomes more refined.

Since Uniswap V3 introduced fixed price range LPs, all subsequent innovative DEX have added price management based on LP.

On Solana, the most finely designed DEX is Jupiter, while the liquidity pool function is most finely set in Meteora. Compared to each other, Meteora's main function is to provide liquidity for corresponding trading pairs, with finely tuned settings for LPs that include price ranges, token volatility curves, and ratios; Jupiter, in addition to its rich LP functions, also focuses on token issuance, designing for user needs, such as allowing users to use dollar-cost averaging (DCA) for batch token purchases.

Beyond DEX, almost all wallets on the Solana chain have on-chain trading pair aggregation functions. With extremely fast transaction confirmation speeds, users no longer need to enter DEX to complete swap operations.

This reflects the design characteristics of DEX applications on high-speed blockchains: when designing functions, modular openings should be left, allowing for plug-and-play combinations so that all user entry points can quickly integrate DEX trading modules, enabling users to utilize liquidity from their DEX when they need to swap.

Current Status of DEX on TON

With the DEX on Ethereum and Solana being so mature in this cycle, what is the current situation of TON? How far behind is it, and where does it fall short?

TON's performance and capacity to bear load are currently the only ones that can stand shoulder to shoulder with Solana among all public chains. However, TON's ecosystem is a hybrid of Web2 and Web3 models, which technically dilutes Web3 in use while deeply integrating Web3 in technology.

The DEX in the TON ecosystem exhibits this characteristic clearly.

For example, Telegram has integrated a centralized trading pool to complete the recharge of stablecoins and TON, subsequently completing the exchange of TON and other tokens. Functionally, this is already a simplified version, and the operational experience is almost identical to CEX's instant exchange.

This function is the primary feature of Telegram's Wallet, with the second function being interaction with the TON public chain wallet TON Space, providing an experience similar to using MetaMask on PC or mobile. If token exchange is needed, STON and Dedust are commonly used within the ecosystem, but their functions are basically similar to Uniswap V1.

Clearly, this reflects TON's shortcomings in DEX. If Telegram Wallet assumes the CEX experience, TON Space and DEX can interact on PC and mobile. Finally, Telegram's Mini App and Bot will also serve as the trading frontend for DEX or CEX functions. These designs optimize the trading experience, but the backend's on-chain native interaction is noticeably lagging.

Currently, all observed DEX, such as STON and Dedust, only provide trading functions similar to Uniswap V1. In our analysis of the Solana DEX ecosystem, we see that for DEX on high-speed blockchains, it is crucial to provide trading liquidity or modularize trading functions, allowing the advantages of liquidity to become the reason for user choice.

In TON, the frontend entry points must exist abundantly within Telegram. DEX still needs to increase the refinement of its business, just like Jupiter and Balancer, to achieve balance among all users, whether they are users, token providers, liquidity providers, or platform developers. Each role requires a certain level of refined functions to cooperate.

What Projects Are Improving DEX on TON?

Compared to DEX like Uniswap, Balancer, and Jupiter, TON has yet to see (or launch) a project that can fully complement all functions. However, after reviewing the design ideas of publicly available projects within the entire ecosystem, I found that the upcoming DEX on-chain trading middleware LayerPixel has the potential to complete the functionality of TON DEX.

LayerPixel, incubated by TON public chain's launchpad TonUP, is a DeFi solution designed for Telegram Mini Apps, officially referred to as Layer 1.5. It can provide services including wallets and DEX (with various trading algorithms). In addition to directly launching PixelSwap for the C-end, it also provides an embedded SDK suite based on Telegram Mini Apps for other applications to develop swap functions.

What TON needs is to have corresponding roles in the full-chain scenarios related to assets. This full chain includes asset issuance, asset trading, trading liquidity supply, oracles, asset pools, wallets, and more.

The function of IDO is issuance. On Ethereum, there are ordinary auction-style IDOs and LBP-style auction IDOs. During auctions, gas and token prices can easily spike, leading to inflated prices that may crash after opening. Therefore, the adoption of LBP, by design, reduces the competition among traders, allowing them to consider buying only after the price meets expectations. In the scenario chain provided by LayerPixel, TonUP can provide IDO issuance, incorporating LBP rules into the issuance of TON's Launchpad.

After IDO, tokens begin to provide liquidity and combination trading, at which point DEX needs to intervene.

LayerPixel's Pixelswap is a DEX based on weighted pools, consistent with Balancer's functionality, supporting LBP asset issuance. This Dutch auction-style issuance method is suitable for small to medium-sized projects with low FDV, and the most common projects within the Telegram ecosystem are these types of game/GameFi projects.

The more refined the design, the more DEX LP resembles the mature LP in centralized exchanges, actively ensuring the yield of funds while isolating risks.

Once token trading begins on DEX, the next steps will involve Oracle, Pool, and wallet services.

Oracle is the process of providing real-time prices from AMM to external DeFi, DEX, aggregators, lending, asset bridges, etc., which naturally possesses this capability based on rich AMM; Pool is a tool that allows users to perform compound staking with multiple assets. In a scenario with abundant on-chain DeFi, various pTokens may emerge, such as many Ethereum DEX providing exchange and staking for Lido's stETH; finally, wallets provide a user operation entry point outside all trading platforms, supported by high-speed blockchains, allowing for transaction aggregation, Launchpad combinations, etc., to design functions within the wallet for use in combination with other applications.

In summary, LayerPixel has designed multiple components such as IDO, token trading, wallets, oracles, and Pools into its business chain. After communicating with its team, it was found that their goal is to address the design shortcomings of DEX on TON and hopes to become TON's DeFi middleware based on multiple functions of LayerPixel.

Currently, it has been reported that the code part of LayerPixel has been completed and submitted for auditing. For security reasons, the audit is conducted by two auditing companies in a cross-audit manner and will officially launch on the mainnet after the audit results are completed.

Final Thoughts

After observing the applications on TON, it becomes evident that TON heavily relies on Web2. This design aims to lower the threshold for Telegram users, but based on the experiences of multiple high-speed public chains, Telegram's official wallet may more often serve as a wallet verification tool in the future, assisting users in conducting more direct on-chain native transactions to ensure asset security and the correctness of Web3 interactions.

For public chains, DEX is the place where on-chain vitality is released. The goal of each DEX is to become a mature financial trading platform, allowing users to possess precise and mature asset management capabilities.

TON has been at ATH, and its ecological value continues to grow. As TON develops vigorously, the data performance of project value will concentrate on DEX trading pairs. Therefore, the more mature the development of DEX, the greater the chances for investors to seize opportunities.