After Hyperliquid recently launched an airdrop, the wealth effect ignited the market, and everyone began to pay attention to the star DEX that may appear in this cycle.
What will the next generation of DEX look like?
The new generation of DEX must be a product that has significant advantages in user experience and liquidity.
One of the directions, I think, is chain abstraction: DEX+chain abstraction=CEX user experience.
1. Benefits of combining DEX with chain abstraction
Chain abstraction allows DEX to provide a CEX-like user experience, reduce the complexity and cost of cross-chain transactions, and improve liquidity. This is particularly attractive for users who need to trade assets on multiple blockchains.
(1) Lower operational threshold: Chain abstraction allows users to use DEX without understanding the underlying chain technology. This means that users do not need to manage multiple blockchain accounts or learn how to transfer funds between different chains, making operations simpler.
(2) Enhanced liquidity: By encapsulating the underlying cross-chain technology, DEX can integrate the liquidity of multiple blockchains, providing richer trading pairs and higher liquidity. This is especially beneficial for small transactions and reduces slippage.
2. How does DEX specifically combine with chain abstraction?
(1) First, we need to establish unified liquidity and use cross-chain bridging technologies such as Polkadot, Cosmos, or Chainlink to allow assets to flow between different blockchains. This enables DEX to obtain liquidity from multiple chains and disperse transaction orders to different chains for execution.
(2) Through smart contracts, DEX can automatically manage the exchange and liquidity pool of assets on different chains. AMM can optimize price discovery and liquidity provision across chains.
(3) Provide a unified user interface so that users can trade without switching wallets or understanding chain details. All cross-chain operations are handled behind the scenes through chain abstraction technology. Ultimately, users only need to express their transaction intentions (for example, “I want to exchange ETH for BTC”) instead of specifying a specific chain or path. The system automatically finds the best cross-chain path to complete the transaction. Combining these technologies, DEX can not only provide a better user experience, but also significantly improve the overall ecological efficiency of decentralized finance (DeFi). In this way, DEX can get closer to the convenience provided by traditional centralized exchanges (CEX) while maintaining the essence of decentralization.
3. User examples after combining DEX with chain abstraction
Goal: Bob wants to buy some USDC on the Polygon network to place bets on the prediction platform Polymarket.
Usage process: Bob enters the transaction interface of the chain abstract DEX and selects “Exchange ETH for USDC”. The system automatically provides the optimal transaction path. Bob confirms the transaction and only needs to pay the handling fee once with any token.
Background processing: DEX automatically processes the following operations in the background.
(1) Withdraw ETH from the Ethereum network.
(2) Cross-chain ETH to BSC.
(3) Convert ETH to USDT on BSC.
(4) Bridging USDT to Polygon.
(5) Finally, USDT is exchanged for USDC on Polygon. The whole process is transparent to Bob, and he only needs to confirm the transaction once.
4. Summary
The reason why applications such as DEX are suitable for combination with chain abstraction is mainly because they all involve cross-chain operations and asset management, and need to simplify the user experience to enhance convenience and liquidity.
Chain abstraction technology makes these applications more user-friendly by abstracting the details of cross-chain processing, reducing users’ learning and operating costs while improving the efficiency and interoperability of the entire system.
Waiting for new products of DEX+chain abstraction to emerge.
Among them, it is worth noting that Particle Network is the leader in the chain abstraction track.
Recently, Particle announced that it will launch a new transaction type product on December 3, which will most likely integrate chain abstraction solutions. Particle Network has done a lot of work in the field of wallet infrastructure, but has not yet issued a coin, so will Particle Network be the next golden dog?