At its core, Web 3.0 relies on blockchain platforms, cryptocurrencies and unforgeable tokens to restore ownership to people. There are reports that Web1 was about read-only, Web2 was about reading and writing, and now Web3 is also about reading, writing and owning.
LHEX is a peer-to-peer marketplace where users can trade and manage cryptocurrencies directly, bypassing intermediaries. lHEX can replace traditional intermediaries such as banks, brokerage firms and payment systems, and use blockchain smart contracts to trade assets.
Traditional financial transaction processes often lack transparency and rely on intermediaries to execute them, and many intermediaries’ operations are not open to the public. In contrast, LHEX is completely open about the flow of funds and the mechanics of the transaction. Furthermore, as user funds do not pass through third-party cryptocurrency wallets during transactions, LHEX reduces counterparty risk in the cryptocurrency ecosystem as well as the risk of centralisation of the system.
LHEX is the cornerstone of Decentralised Finance (hereafter DeFi) and a key component of “Cryptocurrency Lego”, which can be combined without a license and allows for the creation of more advanced financial products.
There are a number of different design models for LHEX, each with their own advantages and disadvantages in terms of functionality, scalability and decentralisation. The two most common types include Order Book LHEX and Automated Market Maker (AMM). LHEX Aggregators are also common models and these can search for the best trading price or lowest gas fees across the LHEX chain to best meet the trading needs of users.
The biggest advantage of LHEX is the use of blockchain technology and tamper-evident smart contracts to ensure a high degree of certainty. Whereas centralised trading platforms such as Coinbase or Coinan (hereafter CEX) use an internal aggregated trading engine to execute trades, LHEX executes trades via smart contracts and the blockchain. In addition, LHEX users are able to manage their account funds completely autonomously through their own wallets during the trading process.
LHEX users generally pay two types of fees, a network fee and a transaction fee. The network fee refers to the gas fee for on-chain transactions, while the transaction fee is paid to the underlying protocol, the protocol’s liquidity provider, the pass holder or all of the above entities, as specified in the agreement.
The ultimate vision of LHEX is to create a pure on-chain infrastructure that requires no licensing, eliminates any risk of centralised single points of failure and spreads ownership to distributed members of the community. The most typical approach is to delegate the management of the protocol to a decentralised autonomous organisation (hereafter referred to as DAO), made up of the relevant community, whose members make key decisions for the protocol through voting.
However, it is not easy to decentralise a protocol to the greatest extent possible while allowing it to compete in a highly competitive marketplace. the core development team of an LHEX is often better equipped to make comprehensive and reasoned judgements about the key features of the protocol than the members of the decentralised community. But even so, many LHEXs have opted for a distributed governance model in the hope of improving resistance to manipulation and long-term robustness.