DEX

In the cryptocurrency trading universe, exchanges play a critical role, serving as platforms for buying and selling digital assets. Classically, most trades occur via Centralized Exchanges (CEX), which, as the name suggests, operate on central decision-making systems. In these systems, users' digital assets are transferred from their personal wallets to the wallets of the exchange. The exchange then tracks these balances using their internal databases. The downside of this approach is the significant risk users take by trusting the exchange to manage their assets safely. History has shown that these centralized exchanges are not immune to threats, having suffered major losses due to internal fraudulent activities or external attacks, such as hacking.

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Conversely, Decentralized Exchanges (DEX) like the one implemented on the Gallux platform, eliminate the need for an operating entity to oversee transactions. These exchanges work on blockchain technology and allow peer-to-peer trades, ensuring that users maintain complete control over their assets at all times. During trades, tokens are transferred directly from the user's wallet to a transaction address, thereby allowing 'trustless' transactions where reliance on a third party is unnecessary.

On the Gallux platform, a DEX will be built to enable decentralized, trustless transactions for any fungible tokens, using Gallux native token ($GLX) as the base currency. This would provide an ecosystem where players can freely trade tokens, with rates determined by an Automated Market Maker (AMM) algorithm balancing supply and demand. A token with lower supply and high demand will command a higher price, and vice versa.

However, liquidity is a crucial aspect to consider for a practical and efficient trading system. Without sufficient liquidity, token trading could be impractical or even impossible. Therefore, the Gallux platform must incentivize users to provide liquidity. The mechanism and amount of $GLX tokens distributed to liquidity providers would be decided via on-chain governance, a decision-making process led by the community itself.

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Now, let's dive a little deeper technically. At the heart of a DEX like Uniswap or Sushiswap on the Ethereum network, or the planned DEX on GALLUX, are smart contracts. These smart contracts are coded to perform the functions of an exchange: they hold liquidity (in the form of token pairs), allow users to trade tokens, and reward liquidity providers with a share of the trading fees. The liquidity is often represented as Liquidity Provider (LP) tokens, which can be staked or traded themselves. Here is a simplified example of what such a smart contract might look like:

pragma solidity >=0.5.0 <0.9.0;

interface IERC20 {
    function transfer(address recipient, uint256 amount) external returns (bool);
    function balanceOf(address account) external view returns (uint256);
    // plus other required functions...
}

contract GALLUXDEX {
    address public token1;
    address public token2;
    uint256 public totalLiquidity;
    mapping (address => uint256) public liquidity;

    constructor(address _token1, address _token2) public {
        token1 = _token1;
        token2 = _token2;
    }

    function deposit(uint256 amount) public returns (uint256) {
        require(IERC20(token1).transferFrom(msg.sender, address(this), amount), "Transfer failed");
        liquidity[msg.sender] += amount;
        totalLiquidity += amount;
        return liquidity[msg.sender];
    }

    // additional functions for swap, withdrawal etc...
}

Remember, these contracts should be audited and thoroughly tested before deploying to any mainnet. The intricacies of contract interaction, especially concerning the exchange of tokens, require careful handling due to the immutable nature of blockchain.