On December 4, slow.trade announced the launch of its new user interface (UI) to interact with Gnosis' DutchX trading protocol. DutchX EDCCs (or smart contracts) have been live on mainnet since July, but the slow.trade UI is intended to make interacting with the protocol much easier. However, slow.trade still suggests new users practice using the Rinkeby testnet version (which requires Metamask) to understand the Dutch auction method prior to engaging in actual trades. (The slow.trade application is unavailable in the United States for compliance reasons.)
DutchX is a decentralized, auction-based exchange protocol that allows users to add any ERC20-compliant trading token pair. Through the use of the Dutch auction method, the DutchX protocol seeks to discover a fair market value for listed tokens.
Under the DutchX iteration of the Dutch auction method, all token-sellers submit their tokens prior to the start of the auction. Then, when the auction begins, the tokens are offered for a high price – twice the final closing price of the previous auction (if there is a previous auction of the trading pair), or well above the going market value. Over time, the price for tokens decreases. Whenever the price drops to one token-purchasers are willing to pay, they submit a bid. The auction ends once there have been enough bids submitted to sell all of the tokens. The price is then determined, and all bidders receive their tokens at the price of the auction-ending bid. The idea is that bidders are incentivized to offer the highest price they are willing to pay to ensure they get tokens, though the efficacy of the method is dependent on the assumption that there are a significant number of bidders in competition with each other.
DutchX is decentralized not just in that anyone can add trading pairs, but also in that all developers are invited to build on and customize it, and that it is governed by a community-owned DAO, dxDAO, built on Arc, DAOstack's modular Solidity framework enabling the deployment, configuration, and upgradeability of blockchain-based organizations.
The appeal of the DutchX method is that it offers a decentralized, transparent price-finding mechanism, but it comes at a cost. It's very, very slow. The slow.trade application tells users that auctions take roughly six hours. It appears, however, that slow.trade has chosen to lean into this, writing this fact into the UI's name and stating, transparently, that "good trades take time."
An earlier version of this article stated that Gnosis created slow.trade and DutchX. slow.trade reached out to ETHNews to clarify that slow.trade is a separate company.