The first DEX in the Chinese region? What are the hidden dangers of MDEX, which is rare across Huobi and Binance?

MDEX's success started with HECO's full support, and it successfully occupied HECO's C-position traffic. It was also inseparable from the team's efforts and no major accidents. The transfer to BSC revealed MDEX's greater ambition. It needs to race against time before Huobi supports new players and cultivate its own ecosystem.

As the flagship project of Huobi's ecological chain, MDEX has achieved a locked-in volume (TVL) of more than US$2 billion on both the HECO and BSC chains in just two or three months with its radical "dual mining model" - as of April 25, there were US$2.32 billion on the HECO chain and US$2.13 billion on the BSC chain, which can be described as a leap forward.

Although MDEX's locked-in volume and 24-hour address number are inferior to Uniswap and PancakeSwap, its 24-hour trading volume is almost far ahead. The combined volume of HECO and BSC chains exceeds US$6 billion, which is almost four times the sum of Uniswap and PancakeSwap.

1 Factors behind the rapid growth

Since the "Summer of DeFi", Ethereum's on-chain gas fees have been rising, and network congestion has once become an "unbearable burden" for users. In this context, the exchange public chain, which is also compatible with Ethereum EVM but has a gas fee that is almost negligible, has become the best choice for Ethereum DeFi fund overflow.

As of April 26, the gas fee of the HECO public chain was 1Gwei, and the gas fee of the BSC public chain was 5Gwei. At the same time, the gas fee of Ethereum was 40Gwei. This is a rare situation after the congestion on the Ethereum chain has been greatly alleviated in the past two days. Recently, it was often hundreds of Gwei.

As a representative project in the Heco ecosystem supported by Huobi's concentrated ecological resources, MDEX has an obvious wealth effect. As can be seen from the figure below, the top choice of liquidity mining on the current HECO chain can still be roughly stable at more than 300%.

MDEX has not only become the portal of the HECO ecosystem, but also the primary release venue for HECO's new assets. The official website clearly stated that it aims to "build the largest DeFi ecosystem platform integrating DEX, IMO, and DAO."

According to SKY, MDEX will not only provide users with pending order trading services in the second quarter, allowing users to enjoy CEX-like trading experience on DEX, but will also provide transparent, open and customizable financing services to project parties, and provide trading services for more assets, thereby further expanding its trading scale.

2 Rare step towards BSC dual-chain parallel

MDEX transfers the assets on the HECO chain to the BSC chain through a cross-chain bridge, which is indeed very smooth. From the perspective of cross-chain deployment, this has indeed captured the current user demand for complex cross-chain operations of different public chains.

It is quite interesting that the recharge channels for mainstream assets on the Binance and Huobi trading platforms currently support the asset formats on the other exchange’s public chains, that is, Huobi supports the recharge of assets on the BSC chain, and Binance supports the recharge of assets on the HECO chain.

Next, MDEX plans to carry out multi-chain deployment on public chains such as Ethereum (supporting the second-layer network), BSC, OKChain, Polkadot, Near, etc. in the second quarter to achieve asset interoperability and create a full-eco transaction protocol. "MDEX users can switch with one click and freely transfer and trade their multi-chain assets." This will undoubtedly be a huge competitive advantage in the future.

The transfer of the only flagship project that HECO has worked hard to build to BSC is somewhat embarrassing for Huobi, but it is a good thing for MDEX, which has become the only dual-chain project that has achieved such a huge TVL. This also shows that Huobi has an investment in MDEX but does not have control over it.

3 What other potential risks are there?

MDEX is by no means complacent and will face many challenges in the future.

First, the issue of exchange support. Will HECO and BSC continue to support it, especially whether Huobi will support new projects to compete with it.

The success of MDEX has a lot to do with the fact that Huobi has no rivals that can compete with it. PANCAKE was created by Binance itself, so it is in an absolute C position. Since MDEX is not under the absolute control of Huobi, "SUSHISWAP" or "HDEX" will appear sooner or later. To some extent, Li Lin's return and hesitation about HECO actually gave MDEX more time to dominate the market.

Second, it focuses too much on liquidity mining, with extremely high locked-up volume but low prices. It reminds me of FCOIN and NEO Flamingo, where mining and selling were serious and the loyalty of coin holders was very low.

Although the MDEX lock-up volume is high, the price of MDX has been sluggish, less than 1/10 of Pancake (CAKE's market value has even exceeded HT). To some extent, this shows that there is a lack of a centralized "big backer" and value capture of MDX in the ecosystem construction, and users are more inclined to mine, sell and withdraw rather than hold.

Third, the "resistance" of liquidity mining. The project's own development. For example, recently there were rumors in the MDEX community that MDEX was "secretly" reducing the repurchase amount - from repurchasing 1000U every 9s to repurchasing 1000U every 90s, and arbitrarily halved the time in advance. MDEX responded that it was BSC congestion and the adjustment would not affect the total amount of repurchase and destruction. This small dispute reflects that community users are beginning to be anxious about mining income.

Judging from the experience of liquidity mining such as Fcoin, if the ecological construction cannot be completed, then early liquidity mining will become "resistant" or even toxic. MDEX needs to continue to accelerate innovation in products and ecology to increase the value capture of MDX.