The DeFi landscape is rapidly gaining ground and along with it comes newly decentralized finance protocols and products. Crypto native users are much more aware of the exploration, fun, and safety that come with owning their keys and transacting with them on the go leading to tons of transaction volumes being traded daily on decentralized exchanges.
The Cardano blockchain is home to decentralized finance products that offer trading, lending and borrowing, yield farming, and staking (for cool incentives) solutions for your Cardano native tokens.
If you are looking to get started with your trading journey on Cardano, Muesliswap is just the right fit and this guide tells you all that you need to know.
What is MuesliSwap?
Launched in November 2021, MuesliSwap is Cardano’s first decentralized exchange (DEX) where users can primarily exchange all Cardano native assets, and perform other activities like earning yield and staking these assets. But unlike other DEXs, MuesliSwap presents with a different exchange model.
The uniqueness of this model makes it stand out from the hoard of other popular dexes like Uniswap which leverages the Automatic Market Making Model (AMM). Instead, Muesliswap replicates the traditional order book model of centralized exchange and improvises it in a decentralized fashion using Cardano’s Plutus smart contracts which are designed to be scalable Let’s explore Muesliswap’s decentralized order book mode.
MuesliSwap Decentralized Order Book Model
This is not your typical exchange model, unlike other DEX that require centralized authority (Automated market maker system), which relies on liquidity pools regarding matchmakers and trade execution.
In this model, there is no central order matching authority. Instead, order matching is incentivized and can be performed by anyone, subject to rules fixed in a smart contract.
Simply put, the decentralized order book of MuesliSwap allows traders to place limit orders directly on-chain without a centralized authority.
The decentralized order book model allows for a pending order directly, which lasts until matched by the independent market maker.
But who are the market makers?
The Market Makers
They are the agents that observe the state of all orders currently locked in the smart contract. Once two marching orders are found, the matchmaker initiates the exchange via the smart contract, keeping the remaining profit margin as an incentive.
Now, the basic exchange model was built on a single matchmaker, but this created a kind of bias as it has been thought that these matchmakers may favor orders at low prices, leading to a centralized concentration of power. Hence, the integration of multiple matchmakers by MuesliSwap.
This development allows everyone to be a matchmaker and thereby contribute to MuesliSwap and, at the same time, earn matchmaking incentives.
A Beginner’s Guide To Trading on MuesliSwap
- Set up a wallet: Download a Cardano wallet like Nami or Eternal that supports dApps. Create an account and securely store your secret key.
- Fund your wallet: Fund your account with $ADA from exchanges (e.g., Binance) and transfer $ADA to your wallet address on your newly created or imported Cadano wallet.
- Access MuesliSwap: Visit the MuesliSwap website and click on the ‘Connect’ your wallet icon.
- Navigate to the home page to select your desired token
Navigate to the home page of the DEX, then come to the market screen, and you can see a list of all the tokens that are currently trading on the DEX. Select tokens under “Markets” to buy or sell. Use the ’instant” for immediate trades at market prices of your desired token or set orders by clicking on the ‘limit’ option to trade at specific prices.
Note: You can toggle between the only verified project icon to make sure you are only trading tokens verified on the DEX (Verified tokens are tokens of projects that have gone through a vetting process by the DEX team and are fairly reputable tokens).
- Place Your Trade
Select the amount of ADA tokens you would like to exchange for your desired assets and click on the ‘swap instantly’ icon to execute your trade immediately.
At the swap interface, you can see the price of your desired token (in this example, we are trading the $MILK token), and the total fee that is going to be taken for that particular transaction.
There is also a returned deposit depending on your swap size. Anytime you transfer or send a particular native token in the Cardano ecosystem, you have to also send ADA with it for your transaction to go through.
This is done by design so the blockchain is not spammed with tokens and NFT transfers. The deposit is eventually sent back to you with your tokens. If everything looks good, then confirm the transaction with the prompt.
- Confirm your trade and sign the transaction.
Click on the confirm trade icon. This prompts you to sign the transaction.
After signing the transaction, your trade is executed and you get your desired native token in your wallet.
If you haven’t already, please take a look at a previous article series on MueliSwap and how it works by Liberlion:
