A follow-up on the smart contract
DONs in DEXs
As we said in our previous post DONs aims to offer the oracle resources with strong confidentiality, integrity, and accountability
DONs are formed by a committee of oracle nodes that cooperate to fulfill specific jobs and choose to establish a long-life relationship to provide persistent services to clients.
With The DONs application, developers can create efficient off-chain data for their smart contract
DONs play a big role in how a few DEXs work, without them some major call functions won't be possible
These DONs serve as a main source of trusted feeds to the Dex smart contract
The role of DONs in DEXs
Before looking at how DONs help in scaling the functionality of some DEXs
Let’s look at the meaning of DEXs
DEXs- short forforentralized Exchanges, a DEXs is a decentralized asset exchange that is inherently decentralized. Entities known as market markers form the backbone of all trading platforms, and DEXs aren’t excluded.
DEXs handle all of the placing buying and selling of an asset with a piece of code by offering what is called Automatic market markers (AMM).
This piece of code only lives on-chain, it will have to find a way of sourcing for off-chain data to determine how some of the few DEXs we will highlight in this post works.
To be able to source such data securely, it will need an Oracle, not just an Oracle, but a decentralized one. This is where Decentralized Oracle Nodes like chainlink come in handy.
DEXs like; Pancakeswap, Apeswap, TraderJoe, Beefy. finance, sushi, and Looprimakekes use chainlink DONs to fetch in some data feed that achieves either of the following functions:
i. To concentrate liquidity on the market price
ii. Help solve the issue of capital efficiency
iii. Set automation to execute limit orders
iv. Create a powerful trading experience for users
v. Create a CCIP to more tokens across the chain in a frictionless and secure manner.
How DONs achieve the Oracle function for DEXs
DONs can achieve each of the above highlight functions through the below simple process
- First Data is pulled from Data providers such as @Coinmarketcap, @Coingecko, @KIAKO, and @Tingo, and then it's aggregated by each node
- Then each node keeps a copy of its result, afterwards, it's requested by the network to be sent to the smart contract
Then two things are achieved
A price update on the particular pairs of assets e.g #ETH/#USD is done.
So without the Oracle, the DEXs smart contract won’t be able to operate securely as we’ve always said; for a reliable, trusted, and secured to be sent to the smart contract it will need DONs like Chainlink.
We’ll continue from here in our next post.
