Polkaswap is a next-generation, cross-chain liquidity aggregator DEX protocol for swapping tokens based on the Polkadot (and Kusama) network(s), Parachains, and blockchains connected via bridges. Through the development of bridge technologies, Polkaswap can also enable Ethereum-based tokens to be traded. Furthermore, the development of the Bitcoin bridge is also at the stage of making Bitcoin tradable on Polkaswap. This is done seamlessly, at high speed and low fees, while exchanging assets in a non-custodial manner on the SORA network.
With its liquidity aggregation technology, Polkaswap has the possibility to trade against multiple liquidity sources under the liquidity aggregation algorithm. It is a solution that offers a huge potential for Polkaswap. The liquidity aggregator algorithm can aggregate liquidity from various sources. Liquidity sources can be in the form of AMM DEXs, order books, or any other algorithm. Because Polkaswap is an open-source project, adding more liquidity sources as a community will be possible by developing within the Polkaswap module. Polkaswap is designed to solve many of the critical problems with AMM DEXs currently that can't be solved on any other DEX. Polkaswap's unique liquidity infrastructure will greatly reduce the risks of impermanent loss and lead to less pair fragmentation than competing AMMs. Polkaswap will operate on a parachain, meaning it will be natively interoperable with the entire Polkadot and Kusama ecosystems, and with the addition of Ethereum and Bitcoin bridges, Polkaswap will be the first-ever cross-chain, fully decentralized exchange.
One key benefit of a decentralized exchange is the ability to control your own private keys and access to information. Owning your private keys means that you alone have full custody of and control over your crypto assets. When you trade on a decentralized exchange, you remove the middleman and complete transactions directly with other users.
With no central authority managing trades between users, technology can help you get the best price for your swap. This is where each DEX begins to differ. When a trade is made, funds go into a “pool” that offers liquidity in the tokens being traded. The rules of each pool will impact the value of your trade. A DEX that allows for multiple pools will provide more options and more competitive pricing.
Where it gets interesting is figuring out which pool will result in the best trade. Polkaswap will offer smart liquidity routing, meaning it will automatically search and source the best pool for your exchange request — thereby increasing your earning potential.
The latest generation of DEXs promise to enhance token access by bridging blockchains or aggregating liquidity from different exchanges. Polkaswap will offer both of these features. It’s built with Polkadot technology and integrates multiple blockchain bridges. This will allow users to trade ETH and ERC-20 tokens, DOT and KSM, BTC, BSC tokens, and whatever others enter the market in the future. Polkaswap will also aggregate liquidity from across both DEXs and CEXs, meaning you won’t have to register with multiple exchanges to find certain token pairs or the best trade price.