0x and StarkWare Partner to Create StarkDEX, Aims to Scale Decentralized Exchange Performance
A new trend has sprung up in the crypto world in the last few months which is the rise of decentralized exchanges as an alternative to traditional crypto exchanges. These exchanges offer certain benefits such as improved security for users and as a result, many traditional exchanges are beginning to launch their own actions such as Binance launching their DEX.
However decentralized exchanges do have their downsides as they are often unable to process transactions at the volume of traditional crypto exchanges but this seems to be changing thanks to a new partnership between 0x and StarkWare which was announced this week.
The announcement in question was regarding the release of StarkDEX which is a new proof system for the ethereum blockchain and is deliberately designed to address certain issues that are generally faced by decentralized exchanges.
What It Means
Currently, the ethereum blockchain is able to verify 3 exchange-related transactions per second and while this is not necessarily a bad number, it can be improved on and StarkDEX intends to do just that. StarkDEX claims that it will be able to scale up decentralized exchange performances to 8,000 transactions per block at their maximum capacity which means 40 to 60 transactions per second will likely be possible for the alpha version of the exchange.
This development brings up the conversation of centralized exchanges versus decentralized exchanges and which is more beneficial for consumers. centralized exchanges have been in existence for longer and are generally more popular and on top of this, they offer more speed and liquidity than decentralized exchanges. However, the downside of this is that they are often at risk or hacks which has become a source of frustration for users as a new exchange seems to be hacked every month and millions of dollars have been lost in the process with large exchanges such as Mt.Gox shutting down altogether after they were hacked.
Decentralized exchanges offer an alternative because of their non-custodial nature since their settlement takes place on-chain. However, this does mean that they are often slower and have less liquidity which is why large traders will often avoid using them. For example, Radar Relay, which is popular 0x-based exchange, saw only $88,000 worth of cryptocurrency trades in the last 24 hours.
Stark, which is short for a scalable transparent argument of knowledge will work by grouping transactions together in batches and sending them to the 0x orders as opposed to processing them one after the other. Once the signature and validity of each transaction are checked, the data will be stored off-chain and the prover creates only one truth for the entire batch which is then Verified by the on-chain contract.
While this addresses the scalability problem, it does not quite address liquidity which is another major issue. To address that issue 0x is working with market markers to look into the intricacies of trading on decentralized exchanges as opposed to centralized changes. While it is believed that they should have some solution to the issue of liquidity in the next year, only time will tell if the issue of the liquidity can be fixed or if it is here to stay and perpetually hinder the growth of decentralized exchanges.