hDEX: A New Generation of Crypto Exchange
It’s no secret that the current landscape of crypto exchange is plagued with systemic, top to bottom problems. These aren’t simple issues that can be fixed by tweaking the UX or some kind of PR campaign. Rather, we consistently have to deal with problems that are baked into the very architecture of each different exchange model today.
Centralized exchanges come with a lot of baggage. KYC/AML laws are strict and do not leave the exchange much breathing room. Yet, such a central structure, with all the risks associated, allows CEXs to boast the fastest trade times with minimal slippage. Essentially, this means that professional, privacy-oriented traders are stuck at a crossroads: give up personal ID and banking information as well as custody of their funds to be able to access institutional grade speeds or sacrifice that speed to allow for a reasonable expectation of privacy.
DEXs represent an inversion of the problem. Traders are forced to sacrifice sure liquidity, institutional speed, and protection against slippage in order to preserve their privacy and maintain custody of their coins. As a result, traders are left with a lackluster solution.
One such example is Tacen, who is working hard at addressing this issue and have designed an optimal strategy in between the two frameworks, which we are pleased to introduce. They are combining the best of both models to create what is called a Hybrid-Decentralized Exchange, hDEX for short. Tacen’s hDEX architecture is a two-fold project: centralized order management with our (TXA project) decentralized settlement. Centralized order submission and matching ensure that traders are able to buy and sell at blazing speeds (200+ per second) while never needing to divulge KYC info, create an account, or surrender their coins.
However, it is the hDEX’s settlement process that sets it apart. They are one of the first projects to utilize our TXA Decentralized Settlement Layer. Trades are settled P2P and broadcast to Settlement Data Providers, which store and rebroadcast that data. SDPs are run by members of the community, which means that Tacen’s future exchange platform (and any exchange that builds in the TXA Ecosystem) will encourage ownership and democratization of the entire exchange process.
We want traders to recognize that the hDEX model provides ample opportunity to trade at high speeds, maintain an extremely high standard of privacy and security, and take part in bringing the hDEX vision to fruition. As such, we are excited about the multiplicity of the hDEX that the TXA ecosystem will be able to support because it means that more and more traders are freeing themselves from the foundational and unavoidable problems that traditional CEXs and DEXs are beset with while also encouraging community-led governance and participation in the exchanges that the community itself trades on.
We will be releasing regular technical updates to introduce more detailed aspects of the hDEX model and the use within the TXA Ecosystem. Some of the upcoming articles will explain the process of trading, the process of settlement on our decentralized settlement layer, and how TXA will utilize DFINITY’s Internet Computer. Stay tuned!
Don’t forget to join our Telegram here! We are eager to hear any questions you may have about the TXA Ecosystem.