Mangata — a Polkadot’s new hero Decentralized Exchange
One year ago, we were attending a conference in Berlin and watching a panel discussion about the state of Ethereum. Gleb, our CTO, asked something that had been haunting him for a while:
“What prevents miners from replacing user transactions and frontrunning with their own?”
As much as it felt like an elephant in the room, the answer was: “Nothing. We can only hope that miners are honest and won’t do that.”
At the time, it wasn’t a palpable problem, but times have changed. Over the past year, the crypto sub-domain of Decentralized Finance (DeFi), has grown more popular and is on a continuing uptrend. With this rise in DeFi, users are increasingly relying on Decentralized Exchanges, lending protocols, and other applications.
With this surge, we’ve also noticed an increasing number of attacks capitalizing on MEV — Miner Extractable Value. It was described in 2019, in a study that appeared on Arxiv, as an attempt to quantify miners’ malicious actions. Miner Extractable Value refers to a miners’ predictable gains, at the economic loss of a user, through reordering block content in a way most favorable to them. In fact, recently there has been announced a major initiative — Flashbots — which is an R&D organization formed to mitigate the negative effects and existential risks posed by MEV.
The problem of frontrunning is well known in traditional finance and it’s sensitive to the degree of being illegal. Unfortunately, developers didn’t have this in mind when current blockchains were being designed, and such malpractice is technically allowed. Frontrunning and MEV is a problem that will create horrible UX for common people: big slippages, rejections of transactions, long confirmation times, and high gas costs. All of this is happening because, under the hood, an army of bots is competing for space in blocks trying to game each other. If not bots, then miners can extract value to the damage of all users.
In such conditions, trading strategies have to analyze and predict mempool activity instead of evaluating crypto-asset prices and their market. We believe this is wrong.
Introducing Mangata, the best DEX for trading
Our mission is to bring fair rules for traders: quick trade resolution, a guarantee of low fixed-fees, and frontrunning prevention for the Polkadot ecosystem.
Our goal is to create the number one Go-To protocol for traders and liquidity providers of digital currencies online.
In existing DEXes, such as Uniswap, a trader has to pay two fees. An exchange fee (typically 0.3%) and a network fee. The network fee is subject to conditions on the Ethereum fee market and is usually very volatile.
In Mangata, there is no network fee and the trader has to pay only a fixed-fee for an exchange operation. By disregarding fees, Mangata can provide 50% cheaper transactions on average
We believe that trading strategy should be built around price prediction and asset valuation rather than on managing network fees.
Frontrunning is prevented on two levels:
No network fees, mentioned above, prevent users from paying higher transaction costs and frontrunning other users.
On a consensus level, the miner can’t frontrun users because the transaction execution order is randomized by a new block’s hash from a subsequent miner. The order in the block is dependent on information that doesn’t exist at the time of block-creation.
Mangata is an AMM (automated market maker) based DEX, a mechanism similar to Uniswap.
The liquidity provision can be provided by two groups of people:
- Validator, where their stake is reused as liquidity in AMM
- Pure liquidity provider, a user without an ambition to become a validator
In effect, liquidity provisioning is merged with staking from the PoS consensus of the chain. We call it PoL — proof of liquidity.
The native token MNG is responsible for staking. Because liquidity provision in AMMs requires a locked pair of assets, every validator will have to stake a pair of two assets, e.g. MNG : DOT. The validator can stake MNG, paired with any token of their choice.
Mangata is a cross-chain DEX, which sits in between Polkadot and ETH DeFi ecosystem. The first and most important pair is DOT : ETH, which is a fundamental liquidity channel.
We use the Snowfork bridge implementation.
Mangata is built as a parachain in the Polkadot ecosystem. A Parachain is a full-fledged blockchain that is connected to a master blockchain (called relaychain) which provides settlement and security. Mangata blockchain is application-specific, which is limited to a specific set of smart contracts, the DEX mechanism in particular.
The advantage of parachains is that you can customize the system for the users and create a compelling product. In the case of our DEX, it’s fixed fees and frontrunning prevention. This wouldn't be possible on Ethereum, where all the conditions are locked for smart contracts, and creators have limited ability to affect the blockchain architecture. We’re not limited only by this first design though and we have a lot more to come!
Another problem is the growing number of DeFi attacks. Since Mangata DEX will be limited only to exchange functionality, there is no risk of being exploited by other smart contracts. No flash loan attacks, no price oracles, no fee manipulations.
We believe that mass adoption of smart contracts can happen only through Polkadot.
Mangata is a DEX with the sole focus on trading UX: fixed fees to make trading profitable and no frontrunning activity that hinders successful trades.
We are here to build the community that will shape the future of decentralized exchanges. Without Polkadot, it wouldn’t be possible.
On Mangata, trading and investing can become what it should be, crypto-assets analysis and predictable profits.
In later posts we’ll share more about the governance, tokenomics and launch details
Keep in touch with Mangata:
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Mangata — a Polkadot’s new hero Decentralized Exchange was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.