Crypto beyond centralisation: How Zeroswap is making it easy to trade beyond exchanges
Say you want to get into cryptocurrency trading. Your first instinct would be to park your money with a centralised exchange. Data from UK-based analytics company CryptoCompare indicates that nearly all top-tier cryptocurrency exchanges extended their market share in the first half of this year—from 89% in August 2021 to nearly 96% in February this year.
Many of these exchanges have one thing in common—they all are centralised.
Centralised exchanges refer to the idea that a managing body at the helm controls all trading activity within the platform.
This includes coordination between a user’s bank and several blockchains or protocols. Exchanges acquire cryptocurrencies to their platform, gain liquidity, and offer them to potential users in exchange for their currency or fiat.
For some months now, decentralised exchanges have also become popular alongside centralised exchanges. Several cryptocurrency enthusiasts and users alike have stood behind the phrase “not your keys, not your coins” to describe user behaviour of leaving cryptos on centralised exchanges.
While centralised exchanges or CEXs offer greater liquidity and regulatory compliance, decentralised exchanges (DEXs) rethink the way exchanges can function. Usually, these exchanges offer cheaper transaction costs and more importantly, greater control over assets.
Of late, these exchanges have been all the rage, seeing an 858% rise in trading volume last year as per a CoinTelegraph report.
Taking note of this shift in user behaviour, Chandrashekar Ramu, Aayushi Jain, and Puneet Bagewadi set uptwo years ago.
Simply put, Zeroswap is an aggregator of decentralised exchanges. It scans across several blockchains offering a particular token and facilitates trade for a user at the best possible price. “We are aggregators, we try to get the best rates available across the exchanges like KyberSwap, Uniswap. So, we aggregate the liquidity from there and we try to provide the best rates to customers,” Ramu tells The Decrypting Story.
It also offers users the ability to trade without the need to pay a hefty transaction or gas fee, enabling a smooth transaction process throughout.
At the moment, ZeroSwap aggregates from six blockchains, including Ethereum, BNB chain, Avalanche, Celo, Optimism, and Fantom.
This idea fetched the startup $2.2 million two years ago from investors like AU21, TRGC, GenBlock, Alphabit, M6, Pranav Sharma (Founding Partner, Woodstock Fund), and Lester Lim (X21 Ventures).
It has nearly 14,000 users globally and is seeing a surge in active users from markets like Vietnam, Turkey, and the Philippines.
The Zeroswap method
Zeroswap’s main offering is transactions without the need to pay excess protocol fees. Say you hold about 1 AVAX token and would like to swap it out for some Binance USD (BUSD), you will have to pay the target protocol some amount of transaction fee or gas fee.
With Zeroswap, you are free to swap your AVAX for BUSD without the need to pay BNB, which is BNB chain's native token as a protocol fee. This can be done by enabling its meta transactions where Zeroswap will pay the fee on your behalf.
Aayushi explains, “For instance, when a user swipes a credit card in a store to pay a bill of Rs 1,000, users are not charged any additional amount besides this because D-mart would pay for the 2% or 1% as Visa or MasterCard fee. We work similarly in that we do not charge users gas fees."
Trading on DEXs sometimes requires a user to hold a token prior to the trade. Using the BNB Chain example from earlier, for instance, if a user wants to trade on the BNB chain they will need to have some of its native tokens in the wallet prior to the trade. Zeroswap does away with this need.
“Even if users don’t have a particular token in their wallet, they can still continue trading and select custom tokens without worrying about paying gas fees for that blockchain,” says Aayushi.
Due to its aggregator approach, users can trade or swap several tokens available on Zeroswap like Dogecoin or Litecoin without registration on the platform.
Getting Indian users to try ZeroSwap has not been without challenges. According to the founders, cracking the Indian market has still been difficult. While there are millions of Indians who regularly trade cryptocurrency, there are still several who are hesitant to try DEXs. Existing FEMA laws in India further complicate the legal terrain in which these exchanges operate, making users wary about DEXs.
With more crackdowns on centralised exchanges, it can get difficult to move these assets into DEXs, even if users are willing. “At present some centralised exchanges have disabled withdrawing of certain crypto and it is not easy to move the crypto to DEX,” says Aayushi.
Another challenge for Zeroswap has been to educate users about how the platform works and its potential benefits. While it has seen success in crypto-friendly markets, in India, the adoption process is slower. “Currently we are just making our customers understand that you really don't need to have a gas token in your wallet. So, you could just come up on the platform and trade,” says Aayushi.
Despite these challenges of adoption, Zeroswap currently makes money through a few outlets, mainly Initial DEX Offering or IDO launchpads—a form of crowdfunding.
It also offers users the chance to join a staking pool of its native token ZEE to make profits. ZEE is also used to help facilitate gasless transactions on the platform. It does, however, plan to set up a small platform fee when it opens up a new business-to-consumer channel.
For Zeroswap, the obstacles boil down to technological limitations. At times, it can be difficult to conduct transactions when a token is spread across multiple DEXs—this is because it issues pressure on the liquidity of a token. Or if a blockchain experiences high traffic, this can cause a surge in gas fees which can make the trading expensive.
Then comes the issue of not being able to convert fiat into crypto directly within DEXs. “So you either need to have crypto on a centralised exchange where you withdraw it, and then you bring it on a chain and then you trade,” Aayushi adds.
To counteract this, next year Zeroswap aims to offer simpler solutions for new users where payments solutions like Moonbeam and Juno Finance will be integrated into the platform to enable swift exchange between stablecoins and fiat.
The founders remain optimistic about the adoption of DeFi, “I think that this industry is hardly five or six years old and DeFi is a fundamental basic layer of blockchains that will evolve further,” Chandrashekar concludes.
(This article was updated to reflect the correct designations and a few factual inconsistencies)
Edited by Akanksha Sarma