Decentralized exchanges have attracted some liquidity recently, handling $22 million in combined trading volumes during the month of June, but some exchanges are seeing as little as half a million traded within 24 hours, or even less.
A new project might change that. Totle is very new and still in beta, but it is currently usable and we even had our own little test-run.
The idea is simple. Rather than going to Bancor, Kyber, Forkdelta or any other decentralized exchange (DEX), you can utilize the Totle platform which aggregates them all. David Bleznak, Totle’s CEO, explained the design as follows:
“We have a family of contracts that act as the on-chain component to our routing system. A user submits orders to our parent contract and then passes the order to the handler contract for the appropriate exchange venue.
The handler, or child, contract then acts as a taker to decentralized exchange. All necessary transactions are bundled together and mined in one block and therefore atomic and trustless. Our users only end up with their orgiinal assets or their new desired allocations.”
There are around six smart contracts that make all this work. Are they audited? – we asked. “We are working on private audit with many groups right now, there are no public audits to report right now,” Bleznak says.
A very reputable blockchain firm is auditing the smart contracts with the results to be released by October when they go out of beta. So, is this safe to use for now? – we asked. Bleznak says:
“Yes, the contracts do not store funds… see Bancor hack – we are not susceptible to this type of situation because we do not store liquidity in contracts, we simply relay orders to the DEX venue for the best execution.”
Decentralized exchanges are in effect peer to peer trading, but in a convenient manner with order books in some cases no different than a centralized exchange, while in some other cases they are more of a broker.
When Bancor was hacked, thus, traders did not lose any funds, with Bancor’s own funds stolen. Totle is basically sort of just another trader, so likewise it wouldn’t have any exposure as one does in centralized exchanges, but of course smart contracts remain very cutting edge so bugs could happen.
We had a mini testrun ourself and it all works smoothly. Once we connect with MetaMask, it tells us our penny holdings we keep there for testruns. You go to trade, and there you add the token you want to buy.
The buying itself occurs through a slider as can be seen in the featured image. You increase or decreased that slider as well as select what tokens you want to exchange for the new one.
We bought a dollar worth of Status because we were very impressed with their Dapp which received our highest rating yet of 4.5 out of 5 in our test-run review.
The purchase can be seen in the image above. Once we clicked submit transaction, it did surprise us a bit by how fast it completed and how quickly the dapp updated itself.
The trick for speed seems to be that they use a max gas fee, rather than fixed say 40 gwei. That did scare us a bit because we did not want to pay $4 in miners’ fees, but the max is a max. The actual fee we paid as demanded by the network was only around 70 cent.
The transaction itself looks pretty interesting with a lot happening on there to handle quite a few somewhat interesting aspects.
That’s because the above is not showing just a simple buy or sell, but a buy at the best price among the integrated DEXs, and if that best price means a partial buy in one exchange and completion in another, Totle’s smart contracts can execute partial orders.
The algorithm for determining best buys and how to slice orders is their secret sauce. That would be far too costly to have on the blockchain, but the execution is on the blockchain.
Bleznak further says they “plan to allow developers to build on the endpoints of our open API,” with a document shared with Trustnodes describing the process as follows:
“A user submits a request to the service specifying which token they would like to buy or sell. It searches across a list of DEXs to find any order that has the potential to fill the request. Orders from the DB. Real-time price discovery. It traverses across the array of orders found filtering out only the best orders.”
The orderbook search is done off-chain, with this method off aggregation allowing for savings on trading of “about 10-20% on average,” according to Bleznak.
You currently can’t place limit orders, only market buys or sells. “We are working on a separate interface for market makers to place limit orders,” Bleznak says.
Interestingly, they’re planning to add margins in the future through a decentralized lending platforms that allow for margin trading called Lendroids and they are further working with Bloqboard.
Coinbase’s Toshi is to apparently add them to their Dapp browser, we are told, with the team behind the project receiving VC funding but “nothing I can speak to just yet,” Bleznak says.
Making this project very interesting, not least because this is the very first where “you can partially fill among multiple venues if thats the best execution,” as Bleznak says.
That’s automatically done with the exchange/s chosen for you, but in the future they plan to allow traders to chose the exchange if they wish.
Fees currently are at zero for the platform itself, but that naturally will change in the future. Bleznak says:
“Normal and familiar fees will be added for the convenience we provide, however because we can partially fill among multiple venues/protocols, we can provide better execution inclusive of our fee rather than the user going directly to one of the venues themselves due to slippage.”
Such services exist in centralized settings, called Prime Brokerages, with Coinbase recently launching one, but here, at least in theory, you don’t need to trust Totle or have any counter-party risks.
In practice that of course will have to be proven by time, but the beauty of smart contracts is that they are open and public. So you can have innovation built on top of innovation, aggregators built on top of decentralized exchanges. And arguably, if competition between aggregators develops, you can have aggregators of aggregators with turtles all the way up.
That’s very different from the current internet or the physical space with its centralized walled corporations. “Just doing our part,” Bleznak says before invoking the man himself:
“What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.” – Satoshi Nakamoto, October 31st 2008.