The Original Intention and Ideal of Crypto Assets: The Revival of On-Chain Barter Transactions

After experiencing several ups and downs in the Crypto Assets market, many people began to question the future of this industry. This article attempts to explore the potential of on-chain barter trading by reviewing the development history of the decentralized exchange (DEX), pointing out a new direction for industry development.

01. The Loss of Control in the Rhythm of the Crypto Industry

Recently, the performance of the crypto market has been different from the past; altcoins have failed to follow Bitcoin's strength. Some investors have lost confidence in industry innovation and see the crypto world as a venue for speculation. Some industry leaders even compare the entire sector to a casino. This situation is closely related to changes in the market liquidity structure.

Changes in Market Liquidity Structure

Since 2018, the market share of non-stablecoins has been continuously declining. In the past two years, the vast majority of trades have been provided liquidity by USD stablecoins. This means that even if the value of Bitcoin or Ethereum rises significantly, it is still difficult to inject liquidity into other tokens.

The transfer of pricing power of Crypto Assets

With the introduction of stablecoins pegged to the US dollar and compliant financial instruments, Crypto Assets are gradually following the rhythm of Wall Street. The emergence of stablecoins like Tether and USDC, as well as the launch of Bitcoin futures, are physically and psychologically impacting the liquidity of the on-chain market.

Stablecoins have replaced the liquidity role of crypto native tokens, undermining the credibility of other tokens. This has led the crypto industry to lose control over its own market rhythm.

02, The Millennium War of Liquidity

The Importance of Liquidity

Liquidity is a fundamental characteristic of the market and is critical to the efficiency, stability, and attractiveness of the market. High liquidity can reduce transaction costs, enhance price elasticity, facilitate information discovery, and optimize resource allocation.

Innovation of currency

The emergence of currency is essentially to solve the liquidity problem. Whether as a medium of exchange or arising from debt relations, currency is the response of ancient elites to the market liquidity issue.

The transformative power of DEX

The emergence of blockchain technology has provided a new opportunity to address liquidity issues. Contemporary token exchanges face the threefold dilemma of sufficient liquidity, effective pricing, and decentralization.

Decentralized exchanges attempt to address these challenges through innovation:

• Uniswap introduces joint curves, pioneering the automated market maker (AMM) model.
• Curve Protocol develops dedicated stablecoin trading curves
• Hashflow connects on-chain and off-chain liquidity
• Friend.tech and Pump.fun designed special curves for small-scale tokens.

MEV and on-chain liquidity

The maximum extractable value ( MEV ) is closely related to liquidity issues. To protect transaction value, developers have constructed various mechanisms to manage MEV:

• Flashbots and Eden Network establish an MEV auction system at the node level.
• KeeperDAO combines MEV extraction with staking
• Projects like Cow Protocol use auction mechanisms to retain MEV within the transaction process.

The Role of Liquidity Dispersal and Agency

Token liquidity is dispersed across different blockchains and protocols, requiring an aggregation layer to consolidate this liquidity. The introduction of a batch auction mechanism enhances the role of agents, providing a new market mechanism to alleviate liquidity constraints.

Batch Auction: The Culmination of DEX Development

Batch auctions optimize trading results by collecting trading intentions and allowing professional agents to bid. This mechanism can:

• Redistribute MEV
• Improve system efficiency
• Maximize value efficiency
• Break down the barriers of liquidity between cross-chain and on-chain/off-chain.

More importantly, bulk auctions create conditions for the return of barter trade.

03, The Resurgence of Barter Trade

A decentralized exchange is essentially a "swap" platform that does not require a predefined universal equivalent. The emergence of batch auction smart contracts has provided a technical foundation for on-chain barter trading.

The revival of barter trade is of great significance:

• Get rid of the limitations of liquidity imposed by the US dollar
• Provide possibilities for DEX to surpass CEX
• Regain control of the market rhythm for the Crypto Assets industry

Batch auctions are an important milestone in the development of DEX, equally as important as the invention of liquidity pools. It provides technical support for the dream of DEX to surpass CEX.

04, Postscript

Although there is general confusion in the current market, as long as technology continues to progress, the future of the crypto assets industry is still full of hope. DEX is just a small part of the DeFi industry, and exciting advancements are happening across the entire sector.

For all industry builders who uphold their ideals, let us encourage each other: "Do not worry that there are no friends on the road ahead; who in the world does not recognize you."