In a recent thread on Twitter, Sooraj, a passionate Blockchain enthusiast, highlighted the fundamental differences between Cardano’s E-UTxO model and Ethereum’s account-based model for decentralized applications (dApps).
While many dApps on Cardano currently resemble Ethereum’s programming paradigm, Sooraj argued that the future belongs to dApps that fully leverage the E-UTxO model.
One of the drawbacks of the concentrated dApps prevalent on the platform is the pooling of users’ assets into shared addresses controlled by smart contracts (SCs).
While this simplifies fund management, it compromises individual user control and introduces potential bottlenecks, going against the principles of decentralization.
As concentrated dApps gain popularity, shared addresses, and SCs face challenges in handling the increasing volume of transactions, performance issues, and limited user control over their assets.
Strategies such as dividing asset pools or distributing governance tokens are insufficient, leading to an inequitable distribution of tokens and centralization of stakes.
To address these issues, a new design approach called Distributed L1 dApps (D-dApps) has emerged. D-dApps grant each user their own personal address, ensuring greater decentralization and user control over assets.
This design is made possible through the use of beacon tokens, a native token standard on Cardano that efficiently tags on-chain data for off-chain APIs, eliminating the need for specialized indexers.
Introducing Cardano-Swaps: A Distributed DEX Proof-of-Concept
Cardano-Swaps, a proof-of-concept distributed decentralized exchange (DEX) proposed by @zhekree, takes advantage of beacon tokens to create a DEX with unique features.
The design includes addresses with identical spending scripts for each swap pair and unique staking credentials, enabling full control over assets and natural concurrency that scales with the number of users. Liquidity, fair prices, and zero slippage are ensured without the need for additional “DEX” tokens.
Despite its potential, Cardano-Swaps faces limitations related to the redundant execution of validator scripts in the Cardano Settlement Layer (CSL).
It increases transaction fees and hits the maximum limit for script execution units. However, more resource-efficient languages like Aiken could offer significant improvements in execution unit headroom.
Cardano-Swaps represents a significant step forward in the development of distributed dApps on the network, showcasing the benefits of the E-UTxO model.
As the platform ecosystem continues to innovate, the future of DeFi on Cardano looks promising, with groundbreaking solutions that fully leverage the potential of the E-UTxO model on the horizon.
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