Research Summary
The report discusses the challenges faced by decentralized exchanges (DEXs) in replacing centralized exchanges (CEXs), particularly in the derivatives market. It highlights the issues of poor execution, higher slippage, and fewer trading pairs. The report also introduces IntentX, a DEX with an innovative intents-based architecture aiming to solve these problems and provide a superior user experience.
Key Takeaways
Current State of Crypto Derivatives Market
- Market Dominance of CEXs: The report states that the crypto derivatives market sees approximately $3T in monthly volume, with over 80% of all volume in the crypto market coming from derivatives. However, 99% of derivatives volume still takes place on centralized exchanges.
- Regulatory Challenges for CEXs: Centralized exchanges face increasing regulatory scrutiny, with many forced to shut down operations in various jurisdictions. Know Your Customer (KYC) procedures are now mandatory across almost every CEX, often excluding jurisdictions such as the USA.
- DEXs’ Shortcomings: Despite the push towards on-chain solutions, current DEX derivative products are lacking in many areas, including poor liquidity, higher fees, slower transaction execution, higher slippage, and a generally poor user experience.
IntentX’s Innovative Approach
- Intents-Based Architecture: IntentX is introducing a unique intents-based architecture, aiming to fix liquidity issues. This architecture allows users to get up to 60x leverage on 180 different crypto trading pairs with deep liquidity and low fees.
- Automatic Market For Quotations (AMFQ): IntentX builds upon the traditional Request for Quote (RFQ) system by creating its own AMFQ, which continuously streams quotations in advance to show traders the best available quotations at all times.
- Just-In-Time (JIT) Liquidity: The solvers (market makers for IntentX) provide liquidity for trades in a JIT fashion, meaning that solver collateral is never idle in a liquidity pool nor is it subject to market risk prior to a trade being filled.
Advantages of IntentX
- Deep Liquidity: IntentX’s system provides deep liquidity, with solvers acting as a liquidity aggregator by sourcing liquidity from wherever is most efficient.
- Capital Efficiency: The JIT nature of filling orders makes the system much more capital-efficient, over 100x more efficient than virtual automated market makers (vAMMs).
- No Oracle Reliance: IntentX’s system is quote-based, and oracles are only used in edge-case dispute resolution, reducing the risk of manipulations.
INTX Tokenomics
- Staking Rewards: Stakers of INTX receive xINTX in proportion to the amount staked, with benefits including 100% revenue redistribution, voting rights for governance, and access to unique strategies and products.
- Long-Term Staking Incentives: The mechanism is designed to reward long-term stakers much more than casual stakers, with a dynamic ratio that instills loyalty amongst stakers.
Actionable Insights
- Understanding the Market Dynamics: The report highlights the dominance of CEXs in the crypto derivatives market, despite the push towards on-chain solutions. This suggests a need for further innovation and improvement in DEXs to compete effectively.
- Exploring IntentX’s Approach: IntentX’s unique intents-based architecture and AMFQ system offer potential solutions to the challenges faced by DEXs. Understanding these innovations could provide insights into the future direction of the crypto derivatives market.
- Assessing the Benefits of JIT Liquidity: IntentX’s JIT liquidity feature could be a game-changer in the DEX space, offering deep liquidity and capital efficiency. Evaluating the effectiveness of this feature could provide valuable insights for other DEX projects.
- Considering the Role of Tokenomics: The report highlights the importance of tokenomics in incentivizing long-term staking and user engagement. This suggests that well-designed tokenomics could play a crucial role in the success of DEX projects.
