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The proponents for centralized exchanges argue for simplicity, regulation, and widespread availability. At the same time, critics state these institutions go against the principles of blockchain and crypto: privacy, anonymity, and decentralization (doing away with intermediaries). This led to the development of decentralized exchanges in 2017, with Bancor Network launching the first AMM platform. Surprisingly, the DEXs had to wait till 2019 to explode into the DeFi scene with the launch of Uniswap on Ethereum. Since, the crypto ecosystem has been littered with hundreds of DEXs, with the total daily trading volume reaching over $1.5 billion consistently in 2022.
As the DEX industry blossoms, more blockchains are challenging the dominance of Ethereum, Cardano leading the pack. This article focuses on the Cardano DEX ecosystem and some of the top decentralized exchanges built on the blockchain.
Understanding the Cardano DEX ecosystem
Cardano blockchain, led by the Input Output Hong Kong (IOHK) team, announced the successful deployment of the Alonzo upgrade on September 21, 2021, kicking off the smart contract era of the blockchain. Despite being seven years younger than its leading competition, Ethereum, Cardano’s smart contracts have witnessed massive adoption. In the first 24 hours, more than 100 smart contracts were running on the network.
Since the Alonzo upgrade in September 2021, Cardano has welcomed thousands of projects on the blockchain, with the total value locked (TVL) on these projects reaching an all-time high of $326 million in March 2022. While the TVL has dropped following the recent crypto market crash, the Cardano ecosystem still has a favorable TVL of $130 million, data on DeFi Llama shows. The burgeoning rise in the Cardano smart contract ecosystem’s TVL has mainly been due to its growing decentralized exchanges (DEXs) market, which currently represents over 90% of the TVL on Cardano.
 
 
This places the Cardano ecosystem in a prime position to challenge Ethereum and other smart contract platforms, with DEXs becoming the defining factor in decentralized finance (DeFi). In the following section, we focus on some of the best DEXs available on Cardano, what they offer, and the potential each has to become the leader in the market.
The best Cardano DEX projects to look out for in 2022
- Sundaeswap
Sundaeswap, a Cardano-based DEX, launched in January 2022 following the success of food trending decentralized exchanges such as Sushiswap and Pancakeswap. The exchange was the most anticipated and second DEX to launch on Cardano, shortly becoming the largest DEX by TVL. Running on Cardano, the DEX allows everyone to trade, stake, and lend tokens on the platform while greatly reducing the network fees compared to Ethereum.
Sundaeswap uses the eUTXO model, an extension to Bitcoin’s transaction model, to settle trades. In the eUTXO accounting model, custody of assets on the blockchain can be traced as unspent outputs of transactions. The unspent outputs are used as inputs into new transactions, which help to produce more unspent outputs. Additionally, Sundaeswap introduces a unique Constant Product Pool, which makes swapping more efficient.
Unlike other DEXs, Sundaeswap elected to distribute its coins in a unique initial stake pool offering (ISO), which makes for a fairer distribution of rewards among delegators. Simply, the community voted to select pool operators to receive SundaeSwap token incentives, attracting and rewarding liquidity providers.
As of writing, the Sundaeswap token ($SUNDAE) trades at $0.03423, a slight 3.5% daily drop, with a TVL of $23.56 million.
- Blueshift
Blueshift is one of the most recent DEXs to launch on Cardano. The DEX provides a new-generation crypto asset management protocol based on liquidity portfolios tailored for traders, investors, and token holders. Blueshift is based on an elaborated Automated Market Maker (AMM) algorithm that provides exchange price calculations and controls liquidity flows. The platform also allows users to stake their tokens on a high-yielding APY platform, offering users a passive income.
Aiming to compete with Sundaeswap and other AMMs in the crypto space, Blueshift introduces liquidity portfolios rather than the orthodox dual token liquidity pools. The community of protocol users manages lists of accepted tokens in liquidity portfolios. Liquidity providers (LPs) can invest in any of these tokens and acquire shares of the whole token portfolio. Here, the LPs agree that their tokens can be freely exchanged within the portfolio, which means that their owned assets will vary over time.
Blueshift creates virtual pairs taking the required liquidity from the portfolio allowing users to swap any token available in the portfolio. Using liquidity portfolios and virtual pairs offers users many advantages, including low price slippage, low impermanent loss, and decentralized portfolio management. Additionally, traders can enjoy zero fees for arbitrage trades and swap any token available with another token in the liquidity portfolio.
The platform currently has over $6.5 million in total locked value, launching in Q2 of 2022. The TVL reached a $23 million all-time high in May following the launch of staking on the platform, making it the biggest DEX on Milkomeda
- Adaswap
Lastly, we selected Adaswap, a Gal Gadot-backed DEX, as the final platform to look out for on Cardano in 2022. Launched earlier this year, Adaswap aims to offer four distinct products to offer its users a full DEX ecosystem for all their Cardano-based assets. The platform launched an automated market maker (AMM)-based DEX for swapping Cardano-based tokens, a dedicated launchpad to help developers build applications on Cardano, a native NFT marketplace, and fixed, long-term, high-yield liquidity pools (Stake and Forget (S&F)).
When staking in S&F liquidity pools, users will receive the regular return on investment, and bonus rewards for stakers aiming to provide capital to projects listed on the AdaSwap Launchpad through the automatically airdropping tokens feature that is held on the platform for liquidity pools.
Conclusion
Cardano-based DEXs are still trailing their Ethereum counterparts in daily trade volumes, community growth, and TVL. Nonetheless, with the Cardano DEX ecosystem only months old compared to five years of Ethereum’s dominance, the former could rise to challenge the latter in the coming years.
Introducing low-fee, instant, and high-yielding AMMs on Cardano could prove a worthy competitor to Ethereum’s DEXs. Finally, the rise of the Cardano NFT marketplaces could introduce new utilities for Cardano DEXs, playing a role in the growing market of DEXs on Cardano.
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