Interview: Peter Kris, Founder of Mangata Finance
Last time we interviewed Plasm Network CEO Mr. Sota Watanabe. This time, we invited the founder of Mangata Finance, the Slovak crypto pioneer Peter Kris. Mangata is trying to fix problems of popular DEXes (like Uniswap or Balancer) and bring this solution to to the whole Polkadot ecosystem.
Hi Peter, can you briefly introduce yourself? How did you get into the blockchain space and how did your path lead to your own project?
Hi, sure. We tried working on blockchains long ago in the Progressbar in Bratislava, sometime around 2013. At that time there was mainly Bitcoin and a few altcoins. Since then, a long way has passed, Ethereum brought smart contracts and the world’s attention focused on them have come out. In 2017, the ICO mania began, which caused a lot of demand for ETH solutions. I’ve always been a developer, so I put Block Unison docs and we started doing customer projects.
Besides that I have always been close to investing and trading, so the idea of a decentralized crypto exchange is natural to me.
So let’s get to the project. What to imagine under a decentralized crypto exchange?
A decentralized exchange is a protocol for changing crypto assets over which the user has full control and does not need to transfer it to a third party. The exchange takes place on a peer-to-peer basis. It is a traditional blockchain principle, extended by the ability to create new crypto-assets and exchange them with anyone on the Internet.
We make a protocol, a smart contract that is open-source, fully public, and anyone can copy it or help us with it.
More precisely, we decided to implement Polkadot technology. It is the next generation of blockchain that allows you to create a multi-blockchain ecosystem where networks can communicate more with each other. Mangata is one such blockchain, it is part of Polkadot.
Thanks to Polkadot, it is possible to create specialized blockchains (so-called Parachains), which can focus on specific functionality and thus create a better product for people. We make a DEX parachain on which there is only decentralized exchange functionality. It has its advantages, such as higher security or e.g. that no one will flood the network due to other deployed products (Cryptokitties).
Can you explain to readers how AMM-based exchanges such as Uniswap or Balancer work? What makes the popular DEXes different today?
There are 2 popular ways to create a price on DEXes — an orderbook and an automated market-maker (AMM). The orderbook matches a large number of orders — limit and market. At all times, it must remember the current status of all orders. Thanks to this, it can guarantee price accuracy and more efficient trading management.
Uniswap AMM has a different principle. In the beginning, it takes 2 coins and sets their ratio according to the relative price between them. This is kept “in stock” at all times. When someone comes to buy a coin, he/she gets a price calculated automatically using a mathematical formula.
It has its advantages and disadvantages. The price at AMM suffers from the fact that many times people get an unfavorable price with a big slippage. It’s a mathematical deviation. The advantage, however, is that it can secure a large order with a single counter-offer. On the orderbook, 1 large order would have to be paired e.g. with 1000 smaller counter-bids.
This fact makes AMM very suitable in a blockchain environment because blockchains have to save space in blocks or on the number of transactions. AMM can manage huge financial volumes in a small number of transactions. Traditional centralized exchanges do not use such AMMs because they can afford an orderbook. They use e.g. hosting on Amazon cloud which is cheap and thus can provide a more demanding solution.
Popular DEXes differ in how they effectively manage liquidity or offer better price behavior. Uniswap always manages only 2 coins with a mutual price ratio, Balancer can automatically balance between 8 coins.
What do you see as the biggest problem of the functioning of these exchanges today? Can you describe these problems in a little more detail?
Decentralized exchanges work relatively well and clearly, but the problem is that today they all run on Ethereum. Ethereum was built on certain architectural principles, which do not scale well at once due to a large number of smart contracts. That is why there is the ETH 2.0 initiative. The decentralized crypto exchange cannot change or influence these principles.
As an example, I mention the fee market, where people have to compete with each other to give a higher fee for a transaction. This is a very bad principle for regular users. Metaphorically, when I go to buy beer for 1 EUR, I always want it to cost about 1 EUR. I don’t want to compete with the crowd at an auction where we overtake who will pay more. I mainly want to use it and not worry so much about the price! 🙂
The negative effect is then that one day the beer costs 1 EUR and the next day it costs 20 EUR. This is a huge obstacle to the widespread adoption of smart contracts because no smart contract can maintain the proven business models that people are used to.
Another problem is the great transparency. The principle of transparency is a fundamental pillar of blockchains, but in certain areas, it is a double-edged sword. Each transaction must go through a temporary queue (mempool) before it enters the block and is sealed into the past of the blockchain. This temporary queue is visible to all and sophisticated programmers, or even miners can overtake any transaction (frontrunning). For example, a normal user goes to buy ETH on the exchange and thus causes a certain price shift. Frontrunner overtakes it, enters a purchase for themselves, and after executing a user’s order, sells their part back with a profit. There is a lot of these activities going on at Ethereum. This results in lower prices for regular users, higher network fees, or even unsuccessful transactions. Very bad conditions for worldwide adoption.
There are many more of those problems, but that is beyond the scope of the interview.
How will Mangata solve these problems?
Mangata is a specialized blockchain on which only a decentralized exchange operates. No other smart contract is possible. It is a cross-chain exchange and thus allows the exchange of tokens between different blockchains. It will be the first to connect Polkadot and Ethereum and will connect other blockchains in the future.
Network charges are zero and therefore there is no competition between users. At the same time, it does not allow any overtaking and does not create negative phenomena such as high variable fees. Only the fixed fee for the exchange is always paid. At the level of consensus, we have our innovation, which prevents even the miner itself from overtaking.
Since only DEX runs on the blockchain, it also avoids the problem of e.g. attack by other smart contracts via flash-loans. It’s much safer.
Mangata will be connected as a Parachain to the Polkadot network and will take full advantage of its interoperability.
Are you planning to connect to other networks such as Ethereum or EOS? Are you developing your own bridge or will you use a ready-made solution from the ecosystem?
Sure, how I told you before, the first is the connection to Ethereum, then Bitcoin, Avalanche, and all chains that will have a network effect.
For now, we use our own modified Snowfork on the bridge. This is the flagship of the Web3 foundation for the Ethereum bridge.
How many of you are working on it?
Me, my co-founder Gleb Urvanov + six people. Now we are mainly technical people, most of them are full-stack and professional engineers with decades of experience. The product is quite complex and we already have a solution that combines parts of software consisting of Rust, Typescript, Go, and Solidity languages. It’s a pain in the butt I must say. 🙂
Otherwise, we are constantly looking for developers and QA people, so feel free to contact me.
What stage of the project are you at? Is it almost finished and being tested or are you still far from the final version?
We have 8 months until the release of the mainnet, but we are doing it 24/7 to make it sooner. It will be important when the Polkadot mainnet is in full version with Parachain communication. It can be 1 month or even 1 year. We will adapt the mainnet release accordingly.
When are you going to your first Parachain auction?
Ideal for mainnet release — 8 months.
Are you planning a private sale or crowdfunding — maybe a lockdrop?
Do you also have any sponsors and partnerships?
We are currently in the Polychain — Genesis accelerator, which is a huge help. Accelerators are good steppingstones for many projects, although at the idea stage. Without the presence of COVID, we’d be in San Francisco now for sure.
I have the impression that these crypto-accelerators are a missing part of the ecosystem. There are many ideas, but few operational experiences to implement them. An example of other things that emerged: Web3 bootcamp in China focused on Polkadot, DeFi accelerator from Electric Capital, Outlier Ventures from London has one and many more.
Do you see any significant competition for your project in the Polkadot ecosystem? After all, DEXes are a popular topic and there are a lot of projects with a plan to develop them.
I like the Silicon Valley philosophy in this. There is no competition in the digital world because the world is so huge that 2 startups will never steal from one cake. In my opinion, all crypto projects should come together and compete with the traditional financial world
Other interesting projects are e.g. Acala, Polkaswap, or also domestic (SK) HydraDX. Moonbeam and DEXes deployed with them will also play a big role. Moonbeam is a copy of Ethereum, so the exchanges deployed there will share all the advantages and disadvantages.
Why did you choose Polkadot and Substrate for your project?
When Polkadot was released, it was clear to me that this was another evolution of blockchain architecture. ETH 2.0 or Cosmos has a similar architecture, which is a natural evolution. Polkadot has a vision of specialized blockchains, which allows for greater flexibility and the ability to create a better service for end-users. I am very much in agreement with this and I think that Polkadot will have a greater adoption compared to other projects.
In our solution, this allowed us, for example, adjustment of the fee market. In the future, in my opinion, will have all Polkadot blockchains focused on B2C fixed fees.
The substrate is another great thing. A blockchain development framework that reduces the cost of software development and maintenance. Frameworks like Hyperledger have always existed, but they were created from above, from corporations like IBM. They are great, but the Substrate is a more bottom-up approach that originated in the crypto geek community, where innovations are being made.
I see it as a completely logical development. Websites have also been done in the past in many ways and are now made in a few standards, e.g. in React.
Do you also have a website dedicated to your project?
Sure thing :)
The first test version of DEX will be there shortly.
Can you conclude with a summary of the project information?
Mangata is a cross-chain DEX that allows you to buy any coin (especially LowCaps). Fees are low and fixed and every order has guaranteed success. We are the first DEX to be connected to Ethereum, and the moment Polkadot is fully in production, we are opening a channel between these two ecosystems.
Thanks so much for the interview and good luck with your project!
Stay tuned for further information about the Polkadot ecosystem projects here on Medium, our Twitter channel Polkadotters as well as in our Facebook Group Polkadot unofficial! We also have our own validator node on the Kusama network so please nominate us if you like what we do — you can find us under POLKADOTTERS, any nomination is really appreciated! Or, if you are feeling really generous, you can send some DOTs to our donate address 🙂