Given the recent boom in the crypto markets and the recent investments by Tesla in Bitcoin, the entire market segment of cryptocurrency is on a pedestal right now with more watching with utmost interest. It is not only Bitcoin that is in the spotlight, but other cryptocurrencies like Ethereum (ETH) that are gaining momentum. At the time of this writing, ETH is valued at approximately $1800, surpassing its 2018 all-time high value by more than 30%. Although diversification is the reason for the increase in ETH’s value, many institutions and funds believe in the practical applications of ETH.
So, why is there a demand for ETH? How did the technology aspect of ETH play a role in its price rise? The answer to these questions is Decentralized Finance, shortly known as DeFi. Decentralized Finance is defined as follows on Wikipedia:
Decentralized finance (commonly referred to as DeFi) is a blockchain-based form of finance that does not rely on central financial intermediaries such as brokerages, exchanges, or banks to offer traditional financial instruments, and instead utilizes smart contracts on blockchains, the most common being Ethereum. DeFi platforms allow people to lend or borrow funds from others, speculate on price movements on a range of assets using derivatives, trade cryptocurrencies, insure against risks, and earn interest in savings-like accounts. Some DeFi applications promote high interest rates but are subject to high risk. By October 2020, over $11 billion (worth in cryptocurrency) was deposited in various decentralized finance protocols, which represented more than a tenfold growth during the course of 2020. As of January 2021, approximately $20.5 billion was invested in DeFi.
More and more projects are currently being built around the theme of DeFi, and this coupled with the Non-fungible Tokens (NFTs) is leading to an increase in the volume of transactions on ETH blockchain, thus congesting the network. Inadvertently, the cost of sending tokens from one ETH wallet to another is costing more than $10, and so is making a trade on decentralized exchanges like Uniswap. As of the writing of this article, a simple trade on Uniswap needed $60 in gas fees in order to execute within a reasonable time frame. Although this might be manageable by the institutions and whales who perform large transactions, it is definitely not friendly to the layman. Just think about this – Would your mom or dad spend $60 in gas fees alone to purchase 0.25 ETH worth of $ERN tokens on Uniswap? This comes to about 13.33% transaction cost, let alone the consequences of ‘price impact’ on Uniswap.
Now the question becomes – Are there better alternatives available for our parents and the general public to purchase the popular DeFi tokens without shelling out these exorbitant transaction costs? Yes! There are solutions in the market that allow the users to use Layer-2 solutions and the DEXs built on top of them to make transactions at lower prices, but these processes involve multiple steps like sending tokens between Layer-1 and Layer-2, and these are not at all friendly to the layman..
On the other hand exchanges like Mandala Exchange, backed by Binance Cloud, allows its users to make transactions at very low fees, while providing thick order-book liquidity. Mandala Exchange shares its liquidity with Binance, and this means that the orderbook at Binance is the same as Mandala. With the SAFU insurance and state of the art wallet security, the customers of Mandala Exchange can trade without the fear of losing their funds. Additionally, the wallet architecture at Binance and Mandala is the same, thus making it very simple to transfer tokens or coins between them with no fees, and take advantage of the staking options available at Binance. Binance exchange offers various staking options to its users without the hassle of dealing with transaction fees on the ETH network.
In addition to the above mentioned benefits of using Mandala Exchange, there are many DeFi projects already listed and trading on Mandala. Creating an account on Mandala allows you to trade these DeFi tokens at substantially lower fees. For comparison, Uniswap charges 0.3% as trading fees, and this is in addition to the ETH GAS fees and price volatility due to “price impact”. Moreover, there are multiple order types currently available on Mandala that allows the users to trade tokens at their desired prices. This is not yet feasible on Uniswap. To sweeten the deal further, users can lock their $MDX tokens on Mandala to unlock discounted trading fees. These advantages at Mandala enable the users to trade DeFi cheaper than on Uniswap.
Over the last month or two, the Binance Smart Chain (BSC) has emerged as a strong contender to ETH’s dominance in the DeFi space. With near zero fees and near instant transaction time, many projects on ETH are migrating or integrating with the BSC chain to avoid the exorbitant costs associated with ETH network. Mandala Exchange plans to list the tokens available on the BSC chain, thus making these tokens accessible to its users (at a much lower cost), with the ability to transfer with zero fees to Binance in order to stake and earn.