DeFi’s tremendous growth hasn’t come without obstacles, as the nascent industry still struggles with high costs, failed trades and front-running.
IDEX, a San Francisco-based decentralized exchange, has unveiled new protocol upgrades designed to solve two of the biggest issues with decentralized finance, or DeFi — slippage and front-running.
The exchange claims that its Hybrid Liquidity protocol solves these challenges by combining an order book and trading engine with the liquidity pools of an automated market maker, or AMM.
“The novel exchange design protects users from the most glaring pitfalls of AMMs, including failed trades and front-running, by instantly executing trades against the best combination of limit orders and pooled liquidity,” the company said, adding:
“This approach generates higher returns for liquidity providers while also allowing for more advanced trades like stop-loss and limit orders.”
IDEX cited research from Dune Analytics showing that up to 5% of transactions on Ethereum-based decentralized exchanges fail due to complications like “too much slippage or insufficient gas prices.” Data from Etherscan and Dune Analytics also shows that roughly 22% of Uniswap transactions between April 15 and 21 failed.
Uniswap is the second-largest decentralized exchange by trading volume, according to CoinGecko. Mdex takes the top spot, based on 24-hour transactions as of Thursday.
DeFi is one of the biggest trends in the cryptocurrency market, but the industry’s rapid growth over the past 12 months hasn’t come without complications. Exorbitant costs, smart contract risks and the higher likelihood of user error are just some of the biggest pain points slowing down adoption. Security is also an issue, as evidenced by the theft and exploitation of hundreds of millions of dollars worth of DeFi assets.
Nevertheless, DeFi remains on track to grow considerably during the next leg of the bull market. Currently, more than $137 billion has been locked into the ecosystem, according to industry data.