What is IDEX? All You Need to Know About IDEX

What is IDEX?

Source: IDEX’s Website

IDEX is a decentralized exchange (DEX) built on Ethereum that combines the best features and performances of centralized exchanges with that of DEXs through liquidity pools, order books, and automated market makers.

Unlike centralized exchanges, where users trade through a single platform or entity, IDEX provides these features through a peer-to-peer network, where users trade directly with each other, removing the need for third-party custody. The platform also provides such services as staking, liquidity mining, and Hummingbot.

History of the IDEX Project

IDEX, previously known as Aurora, was launched in 2017, and its 2.0 version was launched in 2020. The project was launched by co-founder Alex Wearn and his brother Phil Wearn. In 2018, IDEX integrated with the popular Ethereum wallet, MetaMask, to simplify user transactions and promote a wider crypto adoption.

By 2019, IDEX introduced the Hybrid Relay protocol, which combines the benefits of order book DEXs and automated market makers (AMMs). The protocol enhanced liquidity, allowing users to execute advanced trading strategies.

By 2020, IDEX closed a $2.5 million seed funding round led by G1 Ventures and Borderless Capital. The exchange also surpassed its lifetime trading volume, establishing itself as a significant player in the DEX space.

By 2021, IDEX continued to evolve the features and functionalities on the platform, introducing features such as limit order trading and stop-loss orders for its diverse user base.

The IDEX Team

IDEX was launched by Alex Wearn, the CEO, and Phil Wearn, the COO. Alex Wearn has previous experience working for reputable companies. He previously worked as a senior product manager for Amazon, a business-to-business sales lead for Adobe, a senior product manager for IBM, a senior business analyst for IBM, and an alumnus of Kellogg School of Management.

Phil Wearn is a professional accountant with a background in astronautical engineering and entrepreneurial experience. As a former co-founder of EtherEX, he has been building blockchain-based projects since the inception of the Ethereum blockchain. His experience in developing projects helped him develop a focus on high-performance and decentralized protocols, which serve as the basis for IDEX.

The other members of the IDEX management team include Brian Yennie, the CTO of IDEX. he is a software engineer with over 20 years of working experience.

IDEX’s Core Technology: Order Book, Automated Market Maker and Smart Contract

Order Book

An order book is a public ledger of all the pending buy and sell orders for a particular trading pair on a network. The order is arranged to allow buyers and sellers to directly place orders at their desired price or market price.

The IDEX order book consists of features such as limit orders, market orders, and order depth, which ensures there would be liquidity for less popular tokens

The Hybrid Relay structure of IDEX’s order book allows for faster execution of trades, better price options, deeper liquidity, and better transparency, providing valuable information about market sentiments.

Automated Market Maker (AMM)

AMMs operate as liquidity pools where users deposit tokens for traders to swap tokens directly. The ratio of tokens in these pools affects the price, which fluctuates based on supply and demand.

While the IDEX Hybrid Relay protocol relies heavily on its order book, it also integrates the AMM to add a layer of flexibility to the liquidity available to cater to its diverse user base.

The AMM facilitates price discovery for tokens with limited order book activity, providing a better market valuation. It also enhances liquidity for traders looking to trade unpopular tokens.

Smart Contracts

The IDEX smart contract acts like an escrow during decentralized transactions. Trading engines designed with off-chain features execute the trades in real time before dispatching the transaction to the network for settlement, leading to a settlement delay.

The smart contracts use cryptography to ensure ownership and approval. This ensures all trades are authorized, approved, and legitimate, and funds are sent to the appropriate owners.

The smart contracts are also responsible for enforcing the rules of the liquidity pools, allowing users to conduct trades without complicated infrastructures or third-party involvement.

Features of the IDEX Ecosystem: IDEX Classic, Hummingbot and AURA Swap

IDEX Classic

Source: IDEX Website

This is the first hybrid liquidity decentralized exchange that combines the high-performance order book with AMM using the Hybrid Relay protocol. It allows users to connect their decentralized wallets and execute trades.

Similar to the interface of centralized exchanges, it displays the order book, the price trading view, and an easy-to-use buy and sell feature for traders of all skill levels. The platform allows traders to avoid failed transactions, get the best possible prices, and provide liquidity to other users. It also has features like stop loss and limit orders.

The fees on the IDEX platform are categorized into two types:

1. Trading Fees
2. Gas Fees

The trading fees for takers are set at 0.125% regardless of whether they participate in limit trades or pool. The 0.125% is divided between the liquidity providers and the IDEX protocol. The first 0.100% of the fees incentivize the pool and liquidity providers, while the protocol holds the remaining 0.025%. The taker pays for the trade fees, so the other participants of the transactions do not need to.

The IDEX protocol manages the gas fees to prevent front-running attacks, failed trades, bad actors, and inefficiency. The value of gas fees isn’t constant but is usually low. Gas fees are calculated based on the token’s market value and deducted from the user’s reserves.

Source: IDEX Website

Another feature of the IDEX Classic platform is liquidity mining. The concept of liquidity mining is providing liquidity for a trading pair on the platform and getting 0.1% of the trades on the pair based on the proportion of liquidity the user provides.

To help grow the pool of available liquidity, IDEX tokens are distributed to liquidity mining farm participants from the moment the IDEX HL is launched.

Source: IDEX Classic

The platform offers a range of rewards, from staking rewards that earn users 50% of all IDEX trade fees, which are paid every two weeks in USDC. the trading rewards allow traders to earn during special promotions, and the referral bonus gives the referrer a percentage reward and discounts on trading fees.

Hummingbot

Source: Hummingbot Website

The IDEX project integrates the Hummingbot, a tool used to build and run trading bots on the IDEX platform. The Hummingbot automates trades, taking advantage of arbitrage opportunities in IDEX’s AMM.

The arbitrage strategy involves buying tokens from one pool or exchange at a lower price and selling them in another exchange or pool at a higher price. The Hummingbot analyzes the price discrepancies between projects to execute profitable trades.

The Hummingbot includes pre-built strategies that are easy for new users with limited technical knowledge to activate. It also has customizable features for expert traders to finetune their strategies.

AURA Swap

The AURA Swap feature was built when the project was rebranded from Aurora to IDEX. The feature allows holders of the AURA token to swap into IDEX tokens at a rate of 1:1 without any time limit.

The swap process includes approving the tokens in the self-custody wallet and swapping. The swapped AURA tokens would be locked in the IDEX smart contract indefinitely.

What is the IDEX Token?

Source: IDEX Website

The IDEX Token serves key functions in the IDEX ecosystem. The token is used to pay fees for conducting transactions on the platform. The IDEX Token can provide passive income to its holder through staking activities, which also contribute to the exchange’s security.

The tokens are a source of liquidity to fund liquidity pools for users who aim to participate in liquidity mining and earn more IDEX LP tokens. Token holders can participate in referral campaigns to earn extra IDEX.

With the IDEX token, the Humming bot can run a profitable strategy on trading pairs. Further, IDEX holders may claim airdrops from the ecosystem, primarily when the asset is held on a non-custodial wallet.

Holders of the IDEX Token have the advantage of voting on proposals to add additional features and alter service fees and protocols to improve the project prospects. The token provides liquidity for the AMM, ensuring the Hybrid Relay protocol runs smoothly.

Is the IDEX Token a Good Investment?

The IDEX Token plays a vital role in the IDEX ecosystem, serving as a payment mechanism, governance tool, liquidity provider, and a potential source of passive income for its holders.

With the crash of centralized establishments and the drive towards building the decentralized space, the IDEX user base is expected to increase, along with the transactions conducted and the token price.

The focus on community ownership aligns with the original principles of Blockchain technology, allowing for better security and transparency. Community ownership also ensures user participation in governance activities, which would be a key element in IDEX’s success

Risk Analysis

Advantages

The IDEX project has the advantage of decentralization. Unlike centralized establishments, IDEX uses a peer-to-peer system that prioritizes security and transparency, eliminating the risk of single-point failure or third-party incompetence.

The Hybrid Relay protocol offers both the speed of execution and deeper liquidity, ensuring trades are executed faster, even for less than popular tokens. The hybrid design also caters to the diverse needs of traders, allowing them to control their strategies and assets.

The design also ensures cost efficiency. The underlying protocol of the IDEX platform adjusts the fees charged to users based on factors like order size and market volatility.

Disadvantages

While the IDEX project has multiple advantages, it has limitations to its potential. The first is it’s complicated to use. While the Hybrid Relay protocol is an innovative technology, it is also new, making it unfamiliar to new users.

To take advantage of the Hummingbot feature, users require technical knowledge to set up and run the bot. The IDEX design focuses on liquidity pools and community ownership. With little liquidity and few community members, the platform cannot access the needed growth and support to thrive.

Challenges

Like any growing project, the major challenge for the IDEX project is user adoption and liquidity. The technical complexities make it daunting for new users to onboard on IDEX, especially after they have experienced the lack of complexities in CEXs.

While there is no centralized custody, DEXs are constantly being targeted by bad players in the space. Thus, IDEX is set to boost already established security measures and proactive vulnerability detection to maintain user trust.

Competitive analysis

While many decentralized exchanges exist, none comes closer to IDEX than DYDX. DYDX is a decentralized self-custody platform that offers the same hybrid order book and AMM models.

IDEX focuses on providing deep liquidity to make it attractive to users, building security and transparency.

DYDX, on the other hand, focuses on faster execution by optimizing its order book for high-frequency trading activity. While DYDX has a more extensive user base, IDEX boasts an active community focusing on improvement and development.

How Can You Own IDEX?

To own IDEX tokens and become a part of the IDEX ecosystem, users can follow a simple process:

Setup a Wallet

One way to own IDEX tokens is to purchase them through an exchange. For this, the user must create a Gate.io account, complete the KYC process, and add funds to the account to buy the token.

Utilize the IDEX Tokens

Once users have acquired IDEX tokens, they can explore the wide range of functionalities in the IDEX ecosystem, such as staking, liquidity pools, order booking, bot building, and governance.

Useful References

For the latest updates about IDEX, visit:

• Official Website
• Twitter
• Telegram

Take action on IDEX

Users can trade the IDEX token here.

References

https://decrypt.co/37796/crypto-exchange-idex-raises-2-5-million-in-seed-round
https://bullringcrypto.teachable.com/courses/a-beginners-guide-to-cryptocurrencies/lectures/4666644
https://coincodex.com/ico/idex/
https://www.crunchbase.com/person/phil-wearn
https://www.linkedin.com/in/alexwearn/
https://coinmarketcap.com/currencies/idex/
https://medium.com/idex/aurora-dao-rebranding-to-idex-9611e5ef810f
https://docs.idex.io/