When we trade on centralized exchanges, we’ve got used to the fact that it doesn't matter which trading pairs we trade - the trading fees are set by the exchange. As a centralized place of execution, the exchange does not make real on-chain operations with digital assets during client deals.
# Commissions on decentralized exchanges
Decentralized exchanges are quite different in nature. All operations go through interaction with a blockchain, with real transactions. Transactions are necessary for interaction with smart contracts in Ethereum, Tezos or scripts in the case of Bitcoin and Litecoin. Therefore, there are two types of commissions in a decentralized exchange:
- Commission of the smart contract owner (if this is provided).
- Transaction fees when interacting with DEX.
Therefore, when trading on DEX, users should look at both parameters, which are usually shown in the interface of interaction with the blockchain.
# Commissions on Atomic Swap exchanges
When we talk about cross-chain exchange through atomic swaps like Atomex (opens new window), we mean the interaction of two different blockchains. Therefore, it is important to understand that transactions will take place in both blockchains in two scenarios:
one in each network if the swap is successful (initiate fee and redeem fee).
two in one network in case the swap does not pass for some reason and there will be a refund (initiate fee and refund fee).
For example, in case of exchanging Ethereum with Bitcoin you will pay more than $20 commission at the time of writing this article. And the same amount will be paid by your counterparty.
As you understand, it is not profitable to exchange relatively small amounts through a decentralized exchange. It is clear that everything depends on the situation in the network and the chosen pair. For example, the exchange of XTZ to BTC will cost only $6.
And now, assume you want not just to exchange one currency to another, but to make a speculative trade. For example, you want to catch Tezos price change in 5-10%, but in this case fees will take a big part of your profit.
# tzBTC vs. BTC in trading
The way out is very simple, for trading Tezos against Bitcoin you can use tzBTC token. tzBTC is a token on the Tezos blockchain, so transaction fees are taken in the Tezos currency and are about 0.12 XTZ (about $ 0.5 at the current rate). You can read more details about this token on the official website (opens new window). The main thing is that its value is pegged to the BTC, so the exchange rate is always 1:1.
So, we get that the cost of XTZ/tzBTC deal is about $0.5.
Against 6$ when you trade XTZ/BTC with a real Bitcoin.
It turns out that trading a pair with tzBTC is more than 10 times more profitable!
# Transaction speed
As a nice bonus, you will see how much faster the deal with tzBTC will be completed. A new block is formed every minute in the Tezos network, unlike the Bitcoin network, which does not have such speed.
For the XTZ/BTC or ETH/BTC pair, a buy operation takes about 15 minutes and a Sell operation takes about 25 minutes on average. Sometimes these operations can take up to 60 minutes and more, depending on the confirmation time of transactions on the Bitcoin network.
Using tzBTC instead of BTC can greatly save time, which is very useful especially in case of high volatility. For XTZ/TZBTC pair - Buy and Sell deals will take on average 7-8 minutes. The most important thing is that delays of 15 minutes or more are unlikely.
Atomic swap with ETH/TZBTC pair will also take about 5-8 minutes!
In this article we would like to show an example on how to save on cross-chain DEX and increase the deal execution speed. If you want to trade the Tezos rate, and your amounts are sensitive to high transaction fees in Bitcoin blockchain, you can replace BTC with tzBTC token pegged to its value.
Catch price quotes together with Atomex (opens new window)!