Advantages & Features

On a decentralized exchange (DEX) there are two things you can do. You can buy tokens you wish to acquire, and you can provide tokens to the platform to earn passive income and gain access to governance. We explain below what it means to trade and provide liquidity on a DEX. We also explain how the features on MetaDEX reduce your costs when trading and increase your profitability when providing liquidity. (Not all features will be present at v.1. See our roadmap for more information.)
Trading

Buying, swapping, trading. These are different words for saying the same thing: you want token A and are willing to spend some token B to get it. It is possible to purchase cryptocurrencies on centralized exchanges, such as Coinbase or Binance. Many are however turning to de-centralized exchanges and there are many reasons for this.

On a centralized exchange you must send your tokens to the exchange and after trading you must request to have the tokens sent to your personal wallet again. It usually isn’t an issue to get assets onto an exchange, but many times traders wait for hours or days for centralized exchanges to send assets back to their wallets. On a DEX you instead make trades directly from your wallet. The security and predictability of trades on a DEX are carried out through smart contracts which will have been externally audited and have publicly viewable code. Other features of DEXes include lower trading fees, a greater variety of tokens, privacy, and financial inclusion since anyone around the world can participate.

DEXes are great but can also have their own issues, the most relevant being something called ‘slippage’. On a centralized exchange such as Coinbase or Binance there is usually deep liquidity for each token that is listed. In other words, centralized exchanges (CEXes) make sure to have a lot of a token on their exchange before they list it while this isn’t necessarily the case for DEXes. The change in token price which occurs when buying the token can therefore often be greater on a DEX than a CEX. This can be simplified as basic supply-and-demand: If you buy 500 of token A on a DEX that only has 1000, your buying of that token will drive up the price. If you buy 500 of the same token on a CEX which has 100’000 you will in most cases have no effect on the price.

MetaDEX increases liquidity – and thereby reduces slippage for traders – by incentivizing people to provide liquidity through several features. The innovative features for increasing capital efficiency are presented in greater detail under the ‘Investing’ section. One of the features is that the liquidity on MetaDEX will be concentrated for maximum efficiency. Concentrated liquidity means that slippage is reduced for traders and that profitability for liquidity providers is increased. With increased profitability for liquidity providers comes greater incentive to provide more liquidity, which again reduces slippage for traders.

On many DEXes there are trading pairs, meaning there are certain tokens that can be traded directly and others which cannot be traded directly with one another. On MetaDEX greater freedom is given to liquidity providers in regards to how to provide liquidity. This means that you as a trader will have more options for trading between tokens. On MetaDEX there are low trading costs through reduced slippage and greater freedom in trading tokens.

Investing

One of the great benefits of a DEX is that anyone can participate in providing liquidity and earn passive income for doing so. As a liquidity provider you provide some of your tokens onto the DEX to be traded against and receive trading fees for doing so. On CEXes it is primarily the organizations who own the exchange that receive all of the trading fees (some CEXes allow owners of their own tokens to receive a percentage). Many DEXes supply governance tokens to liquidity providers in addition to trading fees. This means that in addition to receiving trading fees you also get voting rights which allow you to have a direct say in the development of the exchange. On a CEX it is the organization behind the exchange that makes all decisions about the platform, with little input from the community.

When providing liquidity on a DEX your tokens are moved out of your wallet and on to the DEX. It is important to note that a DEX is not run by a centralized entity that holds your funds but is organized via a smart contract whose code is open source and therefore independently verifiable, and no one can interfere with the execution. MetaDEX will in addition be audited by reputable auditing firm before launch. The technical features of MetaDEX maximize profitability and freedom for liquidity providers and reduce their risk. Let’s start with freedom and profitability first.

By far the most common setup for DEXes is that liquidity providers must provide two assets in a 50/50 ratio, for example 50% in ADA and 50% in a stablecoin. When providing liquidity on MetaDEX, however, you can provide any number of assets and weigh them any way you like. This means that you could for example provide 50% in ADA, 30% in a stablecoin, and 20% in another token. You can provide liquidity according to your own crypto portfolio rather than a predefined 50/50 split. This can also increase your capital efficiency and profit because there is no need to split your ADA into two or more pools, for example an ADA/TokenB pool and another ADA/TokenC pool. You can have your own ADA/TokenB/TokenC pool, and each time any one of these assets are traded against one of the others you receive trading fees. MetaDEX has no cap on which tokens can be provided to the DEX or in your personal portfolio pool.

It is also possible to provide just a single asset, for example if you currently only have one type of token, or it is only this one asset which you currently wish to provide as liquidity. MetaDEX will also have something called ‘smart tokens’ which make it possible for you to buy and sell tokens from a ‘virtual’ counterpart in the form of a smart contract algorithm. This opens for interesting and new possibilities for ICOs, NFTs, and low-cap currencies.

Revenue streams for liquidity providers on MetaDEX derive from three sources: staking ADA, trading fees, and MTDX governance tokens.

1) When providing ADA as liquidity to MetaDEX your ADA is automatically staked and you will therefore receive staking rewards. The ability to stake while providing liquidity to a smart contract is one of the most powerful features of the Cardano blockchain and which, as far as we are aware, does not exist on any other blockchain.

2) On a DEX it is you, the liquidity provider, who gets the lion's share of the trading fees. A problem with most DEXes however is that your liquidity is automatically spread out at price points from zero to infinity. On MetaDEX you can increase your profitability by concentrating your liquidity to a range in which it is most likely to actually be traded against. You may for example specify that trades of your provided ADA can occur between $1.50 and $4.50. Instead of having your ADA automatically spread out on price points from zero to infinity, the ADA can be put better to use within the most likely ranges where people will trade. Otherwise most of the ADA will never be utilized. Uniswap, the most known DEX, moved to this type of concentrated liquidity in their version 3. Concentrated liquidity also provides greater liquidity for traders within the most relevant price ranges. Greater liquidity for traders means less slippage when trading, which incentivizes them to use MetaDEX. Trading fees are paid to you in the tokens which you provide as liquidity.

3) As a liquidity provider you will also receive the governance token, MTDX, which we explain in greater detail in the ‘Governing’ section.

The more important risk factor for liquidity providers on most DEXes is something called ‘impermanent loss’. Impermanent loss is the loss of value you accrue for providing liquidity as opposed to just having the tokens in your wallet when one of the assets changes in value. This problem occurs because of the mathematics behind DEXes and you can learn more about it here. Impermanent loss is a problem particularly for DEXes that only allow two assets in a ratio of 50/50, as can be seen in the figure below. The feature on MetaDEX to provide liquidity according to your own portfolio, for example 95% ADA and 5% of some other token, not only provides greater freedom to you as liquidity provider but can therefore also reduce impermanent loss.


Credit to Balancer

The other feature to counteract impermanent loss is the possibility to opt in for an insurance. Liquidity providers who desire this insurance will pay for it automatically through a small percentage of their earned trading fees. The insurance will be paid out to liquidity providers if they have a loss when they remove their funds from the DEX and in proportion to their insurance payments.

Several of the features in MetaDEX are inspired by a variety of DEXes with uniquely beneficial features, and which are here brought together in a single DEX on Cardano. We have taken particular inspiration from Uniswap v.3, Balancer, and Bancor. More information can be found in our lightpaper and our forthcoming whitepaper. MetaDEX is being built in Plutus, a functional programming language for smart contracts on Cardano. Functional programming is used by traditional financial institutions for maximum security and in mission critical projects such as aerospace design. The Plutus code for MetaDEX will be made available upon launch. We're building on Cardano because we align with the importance of functional programming languages, formal verification, and peer review.

Governing

MetaDEX is about enabling optimal efficiency and freedom for all involved. This naturally also relates to organization of the DEX itself. One important way to enable optimal efficiency and freedom in organizations is by setting up a system where the people involved in the project have a direct say in its development and also directly benefit from its success. MetaDEX will therefore be a DAO (decentralized autonomous organization).

The MTDX token will be used to govern the DEX. As soon as is viable we will hand over governance of MetaDEX to the token holders. As part of the preparation for the handover our community will need to discuss a number of governance issues, for example if the amount of tokens is the only relevant measure for governance or if other things should also be considered. In these discussions we can and should look to the broader Cardano community and blockchain space for insights, inspiration, and potential pitfalls. At MetaDEX we will carry out research on decentralized governance and decentralized development, and we invite you to contact us if you are interested in participating in this research.

Before the launch of the DEX you can join us by delegating to the METAX stakepool. You will receive ADA as with any other stakepool and you will in addition receive MTDX governance tokens after launch. We would also love to have you join our delegator channel on Discord where we are already now including the community in some measure. The majority of the MTDX governance tokens will go to liquidity providers, and you can provide liquidity when the DEX launches. We believe our tokenomics supports decentralization, and information about the tokenomics can be seen here.

One of the main reasons we are building on Cardano is because of the plans for genuine decentralization of the blockchain itself, especially as it will be rolled out in the upcoming Voltaire era. We in the Cardano community have already started on this in various ways, with Project Catalyst as the most prominent example. Decentralized governance has its own difficulties and there will be, and already are, many things that we will have to figure out – but we fundamentally believe it is worth fighting for, and we’d love for you to join us in this endeavor.

STAKE WITH THE METAX POOL (There is only one METAX pool, all others that may exist are scams and will not give you MTDX tokens)

Trading

Buying, swapping, trading. These are different words for saying the same thing: you want token A and are willing to spend some token B to get it. It is possible to purchase cryptocurrencies on centralized exchanges, such as Coinbase or Binance. Many are however turning to de-centralized exchanges and there are many reasons for this.

On a centralized exchange you must send your tokens to the exchange and after trading you must request to have the tokens sent to your personal wallet again. It usually isn’t an issue to get assets onto an exchange, but many times traders wait for hours or days for centralized exchanges to send assets back to their wallets. On a DEX you instead make trades directly from your wallet. The security and predictability of trades on a DEX are carried out through smart contracts which will have been externally audited and have publicly viewable code. Other features of DEXes include lower trading fees, a greater variety of tokens, privacy, and financial inclusion since anyone around the world can participate.

DEXes are great but can also have their own issues, the most relevant being something called ‘slippage’. On a centralized exchange such as Coinbase or Binance there is usually deep liquidity for each token that is listed. In other words, centralized exchanges (CEXes) make sure to have a lot of a token on their exchange before they list it while this isn’t necessarily the case for DEXes. The change in token price which occurs when buying the token can therefore often be greater on a DEX than a CEX. This can be simplified as basic supply-and-demand: If you buy 500 of token A on a DEX that only has 1000, your buying of that token will drive up the price. If you buy 500 of the same token on a CEX which has 100’000 you will in most cases have no effect on the price.

MetaDEX increases liquidity – and thereby reduces slippage for traders – by incentivizing people to provide liquidity through several features. The innovative features for increasing capital efficiency are presented in greater detail under the ‘Investing’ section. One of the features is that the liquidity on MetaDEX will be concentrated for maximum efficiency. Concentrated liquidity means that slippage is reduced for traders and that profitability for liquidity providers is increased. With increased profitability for liquidity providers comes greater incentive to provide more liquidity, which again reduces slippage for traders.

On many DEXes there are trading pairs, meaning there are certain tokens that can be traded directly and others which cannot be traded directly with one another. On MetaDEX greater freedom is given to liquidity providers in regards to how to provide liquidity. This means that you as a trader will have more options for trading between tokens. On MetaDEX there are low trading costs through reduced slippage and greater freedom in trading tokens.

Investing

One of the great benefits of a DEX is that anyone can participate in providing liquidity and earn passive income for doing so. As a liquidity provider you provide some of your tokens onto the DEX to be traded against and receive trading fees for doing so. On CEXes it is primarily the organizations who own the exchange that receive all of the trading fees (some CEXes allow owners of their own tokens to receive a percentage). Many DEXes supply governance tokens to liquidity providers in addition to trading fees. This means that in addition to receiving trading fees you also get voting rights which allow you to have a direct say in the development of the exchange. On a CEX it is the organization behind the exchange that makes all decisions about the platform, with little input from the community.

When providing liquidity on a DEX your tokens are moved out of your wallet and on to the DEX. It is important to note that a DEX is not run by a centralized entity that holds your funds but is organized via a smart contract whose code is open source and therefore independently verifiable, and no one can interfere with the execution. MetaDEX will in addition be audited by reputable auditing firm before launch. The technical features of MetaDEX maximize profitability and freedom for liquidity providers and reduce their risk. Let’s start with freedom and profitability first.

By far the most common setup for DEXes is that liquidity providers must provide two assets in a 50/50 ratio, for example 50% in ADA and 50% in a stablecoin. When providing liquidity on MetaDEX, however, you can provide any number of assets and weigh them any way you like. This means that you could for example provide 50% in ADA, 30% in a stablecoin, and 20% in another token. You can provide liquidity according to your own crypto portfolio rather than a predefined 50/50 split. This can also increase your capital efficiency and profit because there is no need to split your ADA into two or more pools, for example an ADA/TokenB pool and another ADA/TokenC pool. You can have your own ADA/TokenB/TokenC pool, and each time any one of these assets are traded against one of the others you receive trading fees. MetaDEX has no cap on which tokens can be provided to the DEX or in your personal portfolio pool.

It is also possible to provide just a single asset, for example if you currently only have one type of token, or it is only this one asset which you currently wish to provide as liquidity. MetaDEX will also have something called ‘smart tokens’ which make it possible for you to buy and sell tokens from a ‘virtual’ counterpart in the form of a smart contract algorithm. This opens for interesting and new possibilities for ICOs, NFTs, and low-cap currencies.

Revenue streams for liquidity providers on MetaDEX derive from three sources: staking ADA, trading fees, and MTDX governance tokens.

1) When providing ADA as liquidity to MetaDEX your ADA is automatically staked and you will therefore receive staking rewards. The ability to stake while providing liquidity to a smart contract is one of the most powerful features of the Cardano blockchain and which, as far as we are aware, does not exist on any other blockchain.

2) On a DEX it is you, the liquidity provider, who gets the lion's share of the trading fees. A problem with most DEXes however is that your liquidity is automatically spread out at price points from zero to infinity. On MetaDEX you can increase your profitability by concentrating your liquidity to a range in which it is most likely to actually be traded against. You may for example specify that trades of your provided ADA can occur between $1.50 and $4.50. Instead of having your ADA automatically spread out on price points from zero to infinity, the ADA can be put better to use within the most likely ranges where people will trade. Otherwise most of the ADA will never be utilized. Uniswap, the most known DEX, moved to this type of concentrated liquidity in their version 3. Concentrated liquidity also provides greater liquidity for traders within the most relevant price ranges. Greater liquidity for traders means less slippage when trading, which incentivizes them to use MetaDEX. Trading fees are paid to you in the tokens which you provide as liquidity.

3) As a liquidity provider you will also receive the governance token, MTDX, which we explain in greater detail in the ‘Governing’ section.

The more important risk factor for liquidity providers on most DEXes is something called ‘impermanent loss’. Impermanent loss is the loss of value you accrue for providing liquidity as opposed to just having the tokens in your wallet when one of the assets changes in value. This problem occurs because of the mathematics behind DEXes and you can learn more about it here. Impermanent loss is a problem particularly for DEXes that only allow two assets in a ratio of 50/50, as can be seen in the figure below. The feature on MetaDEX to provide liquidity according to your own portfolio, for example 95% ADA and 5% of some other token, not only provides greater freedom to you as liquidity provider but can therefore also reduce impermanent loss.


Credit to Balancer

The other feature to counteract impermanent loss is the possibility to opt in for an insurance. Liquidity providers who desire this insurance will pay for it automatically through a small percentage of their earned trading fees. The insurance will be paid out to liquidity providers if they have a loss when they remove their funds from the DEX and in proportion to their insurance payments.

Several of the features in MetaDEX are inspired by a variety of DEXes with uniquely beneficial features, and which are here brought together in a single DEX on Cardano. We have taken particular inspiration from Uniswap v.3, Balancer, and Bancor. More information can be found in our lightpaper and our forthcoming whitepaper. MetaDEX is being built in Plutus, a functional programming language for smart contracts on Cardano. Functional programming is used by traditional financial institutions for maximum security and in mission critical projects such as aerospace design. The Plutus code for MetaDEX will be made available upon launch. We're building on Cardano because we align with the importance of functional programming languages, formal verification, and peer review.

Governing

MetaDEX is about enabling optimal efficiency and freedom for all involved. This naturally also relates to organization of the DEX itself. One important way to enable optimal efficiency and freedom in organizations is by setting up a system where the people involved in the project have a direct say in its development and also directly benefit from its success. MetaDEX will therefore be a DAO (decentralized autonomous organization).

The MTDX token will be used to govern the DEX. As soon as is viable we will hand over governance of MetaDEX to the token holders. As part of the preparation for the handover our community will need to discuss a number of governance issues, for example if the amount of tokens is the only relevant measure for governance or if other things should also be considered. In these discussions we can and should look to the broader Cardano community and blockchain space for insights, inspiration, and potential pitfalls. At MetaDEX we will carry out research on decentralized governance and decentralized development, and we invite you to contact us if you are interested in participating in this research.

Before the launch of the DEX you can join us by delegating to the METAX stakepool. You will receive ADA as with any other stakepool and you will in addition receive MTDX governance tokens after launch. We would also love to have you join our delegator channel on Discord where we are already now including the community in some measure. The majority of the MTDX governance tokens will go to liquidity providers, and you can provide liquidity when the DEX launches. We believe our tokenomics supports decentralization, and information about the tokenomics can be seen here.

One of the main reasons we are building on Cardano is because of the plans for genuine decentralization of the blockchain itself, especially as it will be rolled out in the upcoming Voltaire era. We in the Cardano community have already started on this in various ways, with Project Catalyst as the most prominent example. Decentralized governance has its own difficulties and there will be, and already are, many things that we will have to figure out – but we fundamentally believe it is worth fighting for, and we’d love for you to join us in this endeavor.

STAKE WITH THE METAX POOL (There is only one METAX pool, all others that may exist are scams and will not give you MTDX tokens)