Hundreds of new DeFi or Decentralized Finance projects, applications, and NFTs are deployed on the Cardano ecosystem, a flourishing Ethereum rival. After they released their mainnet, one mouthwatering decentralized exchange that aims to become a platform for financial innovation is SundaeSwap.
But what is SundaeSwap, and what functionality or utility does it add to the Cardano ADA community? Is swapping live, and what is the native token, or does it behave like other DEXs such as UniSwap?
Due to lower gas fees, Cardano has shown significant dominance over Ethereum within the marketplace. With SundaeSwap, Blockchain participants can create a market to exchange other native tokens for liquidity provision. Continue reading to learn of this innovation adaptation for this product modeled after UniSwap’s protocol.
Table of Contents
DEX vs CEX
In the crypto marketplace, an exchange is where sellers and buyers trade assets. It can either be a centralized exchange, CEX such as Coinbase or Binance, or a decentralized exchange like Ethereum’s UniSwap and now SundaeSwap.
A CEX will have a centralized authority holding the USD funds or cryptocurrency you deposit as an intermediary. For instance, Binance asks you to complete a Know Your Customer or KYC agreement so they can verify your identity before you start using their services.
A CEX like Binance maintains an order book where buyers are matched with sellers for trades to facilitate transactions. That gives the exchange power of the custodian for your deposits while determining the price at which you’ll sell or buy assets.
On the other hand, a DEX allows you to carry out P2P or peer-to-peer transactions without the intermediacy of a third party. There’s no central authority acting as custodian for your funds, and you’re in charge of your trading account in your digital wallet.
Why DEXs Trump Over Centralized Exchanges
A DEX, while requiring some technical expertise, is more convenient to trade than a CEX, and here’s why.
The decentralized blockchain is the essence of cryptoverse technology. That’s where an algorithm replaces intermediaries. It’s how you remove the expense of third-party involvement and the bureaucracy involved in financial services.
DEXs also maintain anonymity since, unlike CEXs, they don’t require you to complete a KYC. Trades in a DEX like SundaeSwap happen between Automated Market Marker or AMM wallets, and you won’t open an account or transfer funds. Transactions occur via an algorithm to reduce the risk of hacking.
There are several bottlenecks facing DEXs, but once these limitations are overcome, they’ll transform crypto trading and overtake CEXs.
What is Sundaeswap?
As an AMM, SundaeSwap on the Cardano Blockchain ecosystem allows you to stake, trade and swap or lend tokens on the platform. You’ll pay a minimal fee as a trader and earn a return on your fund deposits if you’re a liquidity provider.
SundaeSwap has the vision to become the leading DEX for the Cardano community, much like UniSwap is for Ethereum. It’s built with the ethos of security and trust as the backing of crypto’s foundation, providing its value and representing shared opportunity and vision.
But while aiming to profit from financial transactions by decentralizing access, can SundaeSwap overcome limitations common to DEXs?
Since a DEX does away with the expenses attached to intermediaries, there are fees you’ll incur for transactions. These costs can end up exceeding what you’d pay for CEX services, but other limitations exist as well, including;
High Transaction Fees
To incentivize miners when processing transactions, a fee is paid. In the case of trailblazer Blockchain Ethereum, high fees are unpredictably limiting. If you use their DEXs, the charges are disproportionate to the trading volume, and if you’re transacting small numbers, using a DEX doesn’t let you achieve revenues.
SundaeSwap is an alternative that aspires to solve the gas fee problem, as it’s built on the Cardano Blockchain and facilitates faster P2P transactions. The DEX aims to promote trades with inexpensive transaction fees.
Lack of Sufficient Liquidity
If an asset presents enough liquidity for its currency pair, such as ADA/USDT, it will only achieve optimal price in a DEX. A significant volume asset’s price dramatically varies within seconds if it lacks liquidity, which makes its prices unpredictable or volatile.
Liquidity improves when more users deposit assets in a DEX platform’s asset pool. As such, DEXs like SundaeSwap introduce incentives for maintaining more funds in these pools.
Processing Time for Transactions Is Slow
Since miners have to confirm transactions in real-time before processing, DEX speeds may vary, with UniSwap carrying out 70 per minute. With SundaeSwap, correcting this means they intend to capacitate over 120 transactions in a minute, according to current statistics.
However, the intended capacity differs from the actual number of transactions on the system, and SundaeSwap needs more time to transform upgrades. That’s because DEXs are relatively novel to the crypto world, but as soon as they’re implementing advanced technology, they will be on par with CEXs in terms of speed.
Cardano Ecosystem DEX
The DEX is benefiting from Cardano’s infrastructure, which is well-built and has stellar decentralization features. These include;
Proof of stake or PoS: Unlike Ethereum, a Proof-of-Work or POW blockchain, Cardano utilizes validators for transaction verification. That consumes less energy and takes a shorter processing time, and that’s why the SundaeSwap DEX processes more transactions per minute.
Smart contracts: in September 2021, Cardano launched its smart contracts, which led its proponents to term it a platform with more resilience. To substantiate this development, the blockchain went through academic research to become the most peer-reviewed platform in the crypto space.
Functional sophistication: Compared to its closest competitor, Ethereum, Cardano is more sophisticated as a fully functional platform. As such, the Blockchain ecosystem attracts mainstream users to its infrastructure, which includes DEX SundaeSwap.
SundaeSwap, SUNDAE, and Its Tokenomics
SundaeSwap published its white paper in June 2021, reviewing the fundamentals of protocols. Its initial stake pool offering, or ISO, offered its native token SUNDAE to participants, and since then, there have been numerous updates to its DEX.
When the DEX launched, it had a supply of 2 billion SUNDAE minted and distributed over time. The public received 55%, while its team and investors each had a 25% and 13% supply, respectively. SundaeSwap offered 2% for its advisors, while 5% went to its recruitment efforts.
As the largest DEX on Cardano’s Blockchain, SundaeSwap has 95% dominance, a robustly enthusiastic and engaged community. Thanks to future investment prospects and the utility of the SUNDAE token, it’s an incentive worth holding onto, primarily due to its significant financial backing.
Effective community governance is part of the reason this DEX and its native token represent an excellent investment opportunity. Its development team creates avenues for the community to participate in passionate discussions around the DAO category and governance proposals.
Final Word
SundaeSwap is a DEX built on the Cardano Blockchain infrastructure, which means you can exchange ADA and its native token. You can do a lot with its decentralized nature and simplistic user interface, whether swapping, trading, staking, borrowing, or lending.
Its staking potential is the fundamental reason for earning rewards, but the early DEX project means SUNDAE price could increase with popularity. As a revenue-generating platform, you’ll receive a portion of the platform’s revenue plus governance rights with the available voting mechanism.
