A Review of the New Stellarx Decentralized Exchange
This week, Stellar launched its long-awaited decentralized exchange. Stellarx offers trading of a range of assets including cryptocurrencies from multiple blockchains, using stellar lumens (XLM) as the base currency. The exchange differs significantly from existing decentralized offerings, which are limited to tokens pertaining to a single blockchain – usually Ethereum. With Stellarx, however, users can trade BCH, BTC, USD, ETH and much more, but there’s a catch: non-native assets are represented as ‘tethers’.
Does Stellar’s New DEX Have the X Factor?
On the face of it, Stellar is an odd cryptocurrency project to be championing decentralization. Founded by Jed McCaleb as a fork of his former project, Ripple, Stellar is in many respects as centralized as the coin its codebase derives from. Are We Decentralized Yet? scores Stellar’s XLM cryptocurrency low on various decentralization metrics, noting that the top 100 accounts hold 95% of the total supply, there is just one client codebase controlling nodes, and a mere 111 public nodes are operational. By any reckoning, that makes XLM a heavily centralized cryptocurrency, and yet in Stellarx, we have a candidate for one of the most innovative and user-friendly decentralized exchanges seen yet.
To all intents and purposes, Stellarx operates as a true DEX should: users retain sole custody of their funds, trades are executed against other users, and Stellarx has no access to funds. Throw in the ability to trade non-native crypto assets such as BTC and BCH, plus the option of making fiat currency deposits, and Stellarx starts to sound more like a centralized exchange than a bare bones DEX on a par with IDEX or Forkdelta. There are some caveats that come with trading non-native Stellar assets, which we’ll get to shortly, but straight off the bat, Stellarx is more feature-rich than any of its counterparts.
Trade Anything, Anywhere
“Any asset that is created on the Stellar network may theoretically be displayed, no matter whether it would be considered a currency, commodity, security, utility token, or other type of asset under your local applicable laws and regulations,” notes Stellarx in its Ts & Cs. “You are responsible for determining the legality of your transactions.” With each trade, the counterparty sends tokens directly to your Stellar wallet and vice-versa, ensuring that there is no custodial risk incurred. They explain:
On Stellarx, you can go US Dollars to Bitcoin to Chinese Yuan to Mobius from a single wallet. That’s not possible anywhere else.
Upon visiting Stellarx for the first time, you’ll be prompted to sign up by submitting an email address and password. That’s the only verification you need to trade on the platform, which is pretty cool, as is the built-in password strength calculator:
You’ll then be prompted to create a private key for the Stellar wallet that will be tied to your trading account and to make a note of the recovery phrase. At this stage, Stellarx bears many similarities to the Waves decentralized exchange. The trading interface you’ll next be shown, however, accompanied by a platform walk-through, is far slicker than anything that any rival DEX has produced to date.
The first question that users navigating their way around Stellarx may have is how the exchange of cross-chain assets is made possible. This has hitherto been a tough nut to crack, with atomic swaps seen as the likeliest solution to what is a complex problem to solve in a trustless setting. Stellar’s solution is surprisingly simple: the majority of the assets it offers are ‘tethers’ i.e tokenized representations. They explain: “They’re tied to either fiat like USD or to cryptocurrency from other chains, like Bitcoin and Ethereum. You can trade tethers like any other token, but you can also exchange them for the asset they’re tied to.”
So when you buy bitcoin cash or ethereum on Stellarx, what you’re really buying is a Stellar-issued token that represents that crypto. (The Waves DEX does something similar with ethereum, which is tradable on Waves despite operating on a different blockchain). On Stellarx, tokens are listed as either “fiat tethers”, “crypto tethers” or “native tokens”, the latter being native to the Stellar blockchain.
Zero Fees and Human-Readable Addresses
In addition to boasting zero trading fees, Stellarx offers human-readable wallet addresses that comprise the email address you signed up with followed by “*stellarx.com”. Users who’ve no desire to publicly disclose their email address can use a non-identifiable public key instead. Assets listed on Stellarx can be filtered by volume, price, name, issuer, and other variables. Before you can begin trading you’ll naturally need to deposit funds into your account. In addition to XLM, Stellarx accepts USD, implemented with the aid of Anchorusd.com. While KYC is required to use Anchor’s service, it’s nevertheless novel to see a DEX offer fiat deposits.
When it comes to withdrawing funds, there are two options: select another Stellar address or choose an off-chain account. If you’re holding ‘tethered’ funds such as BTC or BCH, you’ll need to visit the website of the issuer who offered the asset. In the case of BTC, for example, that means visiting Naobtc and converting your Stellar BTC for real BTC, or with BCH it necessitates swapping tokens at Apay. Stellarx will soon support off-chain withdrawals in-app, making this process less convoluted. There’s still plenty of work to be done on improving the platform, adding more assets, and onboarding enough users to build sufficient liquidity. On early evidence, though, Stellarx has a lot going for it, forming a welcome addition to the decentralized exchange ecosystem.
What are your thoughts on Stellarx? Let us know in the comments section below.
Images courtesy of Stellarx.
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