Creating The Balance between Interoperable DEXes with Equilibrium

The earlier concepts of decentralized exchanges were designed to use crypto methodologies and blockchain technology to reduce the number of intermediaries in a financial transaction and shifting control of users’ funds back toward the users again. The gap in between got narrowed.

Thanks to this technology: orders can interact directly with each other based on fully on-chain models utilized by decentralized exchanges. The preferred decentralization is realized to a certain extent; however, the cost is the high network fee. No matter what kind of order management users intend to perform, quite an amount of gas fees need to be paid.

In some other upgraded systems, orders are taken off the blockchain and then broadcasted, smart contracts will do the matching on-chain. This evolution gives the chains some relief by reducing the on-chain transactions, but still, all these transactions must be validated on-chain, which causes the issues like expensive order modification and cancellation, transaction failures, and even front-running.

The volatile expense of trading in decentralized exchanges has become one of the major problems we are facing. On top of that, another topic we are concerned about these days is interoperability. We expect cryptocurrencies should work easily with other cryptocurrencies, so that we might be able to transact in BTC while the counterparty receives ETH, for example. Interoperability enhances financial freedom in the crypto world, and all these financial operations should be designed to take place in a trustless environment without any centralized point of failure. Among all the interoperability solutions we have, for the time being, Equilibrium is by far the only DeFi platform of its type to offer true cross-chain compatibility.

Equilibrium is introducing a decentralized interoperable market powered by Polkadot, which gets users to access cross-chain liquidity.

With Equilibrium, users can:

  • Lend out assets and earn interest.
  • Provide liquidity to cover potential borrower losses while earning yield on it.
  • Borrow assets for trading, leveraging, hedging, and so on using collateral and paying interest.
  • Exchange crypto assets and trade on margin.

Equilibrium uses a Substrate-based engine to achieve cross-chain compatibility by way of Polkadot’s integration of third-party bridges to different blockchains to drive interoperability for various DeFi liquidity pools. The design of Equilibrium’s protocol and Polkadot’s underlying technology allows the creation of the first leveraged, interoperable decentralized exchange.

EQ as the native token of Equilibrium works as bailout liquidity and collateral for loans. As collateral, EQ provides the liquidity in assets of the users’ choice, including Equilibrium native USD-pegged stablecoins. As for the bailout, it’s Equilibrium’s novel liquidation mechanism facilitated by EQ. Users earn a yield by securing loans in the system and locking crypto assets in Equilibrium’s bailout pools in advance of a market decline or black swan event. By Equilibrium’s system design, this group of users is named “bailsman” which is a completely new role in the DeFi space, and they play a pivotal role in keeping Equilibrium running smoothly as well.

Bailsmen provide the liquidity in advance which guarantees sufficient collateral in the system for liquidating borrower debt. By locking different digital assets into separate pools and earning passive income in EQ tokens simultaneously, bailsmen supply Equilibrium with the funds necessary for managing margin calls in advance. You can consider bailsmen as the third-party participants who are incentivized to take on liquidated debt and collateral.

Other than utilization for bailout and liquidity providing, EQ also enables the holders to vote for some components of this governance as Equilibrium is driven by a set of system parameters that can be modified via a decentralized on-chain voting process. With Substrate’s democracy and council pallets, the majority of tokens on the network will determine the outcomes of key network decisions that are made after the stake-weighted voting procedure.

It would be too ignorant to skip liquidity farming when we talk about DeFi projects. Equilibrium has taken this into consideration as well, and it has been striving to attract crypto users and their liquidity to its ecosystem. Apart from the supply for the future development of Equilibrium DEX, such as market maker incentives and periodical prizes to most active traders, the liquidity farming pool will distribute EQ tokens to borrowers and bailsmen alike, based on their relative liquidity size, rewarding bailsmen first.

Last but not least, Equilibrium’s native token EQ can also be used to pay various fees, such as transaction fees, dApp fees (Equilibrium DEX charges trading fees in EQ to sustain operations), and interest fees.

Equilibrium will eventually be deployed on Polkadot, and it is in preparation for the upcoming Kusama parachain auction for the moment. This summer, the Kusama auctions have made history for the development of Polkadot. The first batch of 5 parachain slot auctions on Kusama was completed successfully over the course of June and July, which was a watershed moment for the entire Polkadot ecosystem. The second batch of Kusama auctions is coming in hot, and there is no way Equilibrium is going to miss it. Its canary network, Genshiro, will jump in and share the experimental spirit of Kusama.

Genshiro intends to field-test most of the exciting new technology of Equilibrium on Kusama first so that its sister network Equilibrium can be deployed stronger on Polkadot. It will launch its product on Kusama with the aim to battle test its technology by introducing a much wider range of assets than initially supported in Polkadot, lowering critical collateralization requirements to 100%. Furthermore, Genshiro will roll out the DEX and introduce a wide range of derivative assets based on traditional financial assets, such as perpetual swaps and/or future contracts on commodities, stocks, ETFs, etc.

Just like its older brother, EQ token of Equilibrium, Kusama-based GENS token will function as a multipurpose token within the Genshiro system:

  • GENS holders are allowed to express their opinions about the system state and enforce the governance decisions.
  • Validators and Collators will be rewarded in GENS for running blockchain nodes and performing parallel work.
  • Liquidity providers will receive distributions of GENS by the Genshiro system.
  • GENS can be used to provide liquidity for bailout and collateral in Kusama-based liquidity pools
  • GENS token can be used to pay transactions, interest fees.

Moreover, Genshiro presents you with its exclusive NFT collectibles: Genshiro NFT Cat. To show your support to Genshiro and help the project win a Kusama parachain slot, you can purchase one of these cats through auction, and all proceeds from the NFT auction will be primarily used to fund Geshiro’s bids in Kusama parachain auctions. There will be surprisingly privileges for Genshiro NFT Cat holders such as discounts on commission fees for Genshiro DeFi products.

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