Dexter User Guide 1: Using Dexter With Kukai And Twitter To Make Transactions

by | Jan 19, 2021 | Exchanges, Guides, Latest

Note from the Author — No websites, programs or applications talked about in this tutorial represent endorsements of any kind, thorough research into any applications used on the Internet is to be advised.

This guide represents our own experience ONLY and other users may have different experiences. Users should always undertake their own research and be responsible for their own funds.

XTZ.News makes no representations or warranties of any kind, expressed or implied, about the reliability or suitability of the applications mentioned. This tutorial was written as a user-guide to help people understand Tezos wallet and exchange functions ONLY and does not represent any kind of financial advice.

We will start with a brief introduction to decentralized exchanges, AMMs and Dexter, before jumping straight into the user-guide.

This Part 1 guide will concern connecting wallets and making transactions, in Part 2 we will move onto providing liquidity.

What Is A Decentralized Exchange

Dexter is the first decentralized exchange on Tezos. Unlike centralized exchanges where the control of the account remains in the custody of the exchange itself, decentralized exchanges enable users to remain in control of their funds within the platform.

Centralized exchanges create wallets for the user within their platforms, these are also known as ‘custodian wallets’.

A custodian wallet is a wallet where a third party (usually an exchange) holds the private keys. With a decentralized exchange however, users are able to connect their non-custodian external wallets to the exchange platform.

Non-custodian wallets are wallets where the the holder keeps their own private keys and has full control over the funds, enabling the user to ‘be their own bank’.   This is important as it enables self-custody.

In cryptocurrency there is the well known phrase used when describing users keeping their funds on an exchange:

‘Not your keys, not your coins’

A decentralized exchange allows self-custody of funds within the platform, facilitating peer-to-peer transactions to be undertaken more securely without the need for an active intermediary.

A transaction and transfer out scenario taking place on a centralized exchange would typically include many intermediary actions to make it all possible. With a decentralized exchange, smart contracts are used to keep the order books and facilitate transactions.

Automated Market Makers

Specialised decentralized exchanges such as Dexter are what are known as Automated Market Makers (AMMs).

Some of these AMM’s such as Uniswap and indeed Dexter are also known as Constant Product Market Makers (CPMMs) due to the algorithm they use in determining an assets price which we will cover in more detail in part 2.

The aim with Automated Market Maker exchanges is to always be able to provide you with a quote to trade two different assets.

They do this through the use of liquidity pools. On centralized exchanges, buyers place bids and sellers place asks of different prices to trade an asset.

Users of the exchange look at these bids and asks and if they like the price they can execute the trade to take up that bid or ask at the price that was previously determined by the buyer or the seller.

On a decentralized exchange such as Dexter however, liquidity providers place funds into a liquidity pools with the incentive of receiving some % of the fees of transactions that take place on the exchange (in Dexter’s case 0.3%).

Liquidity providers receive liquidity tokens which represent their share in a particular liquidity pool and these can later be redeemed for their share in the pool with the added fees the pool has received.

These liquidity pools ‘make the market’. Having these pools of liquidity means the AMM exchange can make transactions in a trustless manner.

You can think of these transactions as peer to peer transactions that are calculated by formulas set by the AMM exchange. We will cover AMMs, liquidity pools and how they work in more detail within part 2 of this Dexter guide coming up later in the series.

Decentralized Exchanges – The Advantages:

There are many advantages that could be placed alongside the features of a decentralized exchange. Decentralized exchanges can help with:

  • Removing the risk of users losing their funds to an exchange hack, however it means that users must secure their own account by keeping their private keys safe and secure.
  • Removing third parties and intermediaries, enabling certain efficiencies.
  •  Making data more trustworthy and enabling transparency as decentralized exchanges make it harder to wash transactions and fake volume.
  •  Speeding up the evolution of decentralized finance products and the creation of brand new products that couldn’t have been created without decentralized exchanges.
  • Enabling better privacy and more decentralized coin listings.
  • Enabling trustless transactions, meaning you don’t have to trust the exchange to make the trade, or to do something unexpected such as halt trading on a particular pair.

There are some disadvantages too such as lack of liquidity, volume, lack of speed and many more. We advise you do your own thorough research on decentralized exchange pros and cons before looking to interact with one of these platforms.

Dexter Compatible Wallets

It is now possible to use Dexter, both on a desktop computer, laptop or on mobile phones. There are different wallets which serve both these use-cases. It is possible to use Dexter on a desktop or a laptop with the Thanos and Kukai wallets.

It is also possible to use Dexter on a Mobile with the Magma wallet.

There are also alternative ways to connect to Dexter via other wallets such as the Airgap wallet and Ledger through the Beacon extension by Papers on both desktops, laptops and mobile phones.

In fact the Kukai wallet itself (and the example we are going to show in this tutorial) uses Beacon under the hood, but you would never know you are using it until right at the end on linking it to Dexter as we are going to show. 

For the purpose of this particular part 1 tutorial, we will use the Kukai wallet as as an example and we will look to connect to the wallet through Twitter as this is the most easily accessible way to onboard new users into the Tezos ecosystem.

We have also already created a Kukai wallet user guide here.

Connecting Kukai To Dexter On A Desktop/Laptop Using Twitter

Before you start this Dexter user guide, it is recommended that you first access/create your Kukai wallet first, so that you will be able to connect it to Dexter and so you are familiar with it.

You can find a guide on how to create, access and fund a Kukai wallet here.

Once you have become familiar with your Kukai wallet you can then visit Dexter.exchange.

Upon visiting Dexter for the first time you will be presented with a screen similar to the one below where you can learn more about the exchange, once you have read the information you can click on ‘Use Dexter’ as highlighted: 

This will then take you into the Dexter exchange where you will be able to ‘Connect Wallet’:

Here you will be given the option to choose the type of Tezos wallet you would like to connect. We are going to be using the Kukai wallet in this example, so we will choose the Kukai option here:

This will take you to the following Kukai page where it will tell you to access the wallet in order to complete the pairing to Dexter.

We are going to select the ‘DirectAuth’ option here as we will be connecting to the Kukai wallet via Twitter.

Once clicking ‘DirectAuth’, we will select the Twitter option shown here: 

Once we have signed in we will need to authorize the Kukai wallet app within Twitter:

Once we have authorized the Kukai wallet app within Twitter, the wallet will load up and will start pairing with the Dexter exchange:

The wallet will then pair and once it is done it will let you know that the pairing has been completed.

Next, permission will be requested to use Kukai on the Dexter exchange. 

Simply select the Kukai wallet account you would like to connect to Dexter (If you only have one Kukai wallet account, that will be the default one already selected here) and then click ‘Approve’:

Once you have clicked ‘Approve’ then you will be taken to a new page where you will see that you interacted with Beacon for the first time. Here, simply click ‘Done’:

PLEASE NOTE: It’s important to keep your Kukai wallet window open as you will later need to go back into it to authorize any transactions made later.

Once you have clicked done you will be placed back on the Dexter Exchange, with your Kukai wallet, used with Twitter connected.

You will then be in a position to start making transactions on Dexter.

Making A Transaction On Dexter

So, you have your Kukai wallet connected to the Dexter decentralized exchange and you have funds in your account, you are now ready to make a transaction.

Here we can see our balance, which is just over 21 XTZ and two exchange pairs XTZ and tzBTC. If we select ‘tzBTC here’ we can see other options that we’d be able to trade including ETHtz, USDtz and wXTZ:

In this guide we will use XTZ/tzBTC as the example pair we want to trade, but this same process would also be relevant when trading XTZ for any of the other pairs mentioned above too.

Our plan is to trade some XTZ for tzBTC and eventually use this XTZ and tzBTC to provide liquidity on the Dexter exchange.

At the same time, we still want to leave some in our account for future gas fees (although they will end up being a lot less than 1 XTZ for what we want to do here).

In this situation, we want to exchange 10 XTZ for an equivalent amount of tzBTC. In order to do this we type in ’10’ into the XTZ box here:

As you can see we have placed 10 XTZ  to exchange and the Dexter exchange has stated the amount of tzBTC we will receive for this amount in this case 0.00072457 tzBTC.

There are options to send the tzBTC to another address, if you choose this option just make sure that you are sending to a Tezos address that can accept Tezos FA tokens and is currently compatible with tzBTC.

As we are looking to provide liquidity to liquidity pools later in this training series we will not select the option to send the tzBTC to another address.

Below this, you will see the ‘estimated slippage’ for this transaction. Slippage accounts for the difference between the expected price of a transaction (trade) and the actual executed trade.

There is a way to change what you are willing to accept as an estimated slippage by clicking ‘Advanced Options’ here.

This will then load up a pop-up where you can change the estimated slippage you are willing to expect.

Once you have selected your acceptable estimated slippage you can then select the exchange button to make the trade:

Once you have clicked ‘Exchange XTZ for tzBTC’, you will see the following message to state that the transaction is ‘Processing’ and a request has been sent.

 

This transaction won’t take place until you go back into your Kukai wallet to invoke the contract and make the transaction (this is why we stated earlier to keep your Kukai wallet open:

Once you click preview, you will be taken to another pop up where you can see more details about the transaction and you also have the option to approve and make the transaction.
Once you have clicked on ‘Confirm’ you will just need to authorize the Kukai wallet to make the transaction through the Twitter API:
After you click authorize you will receive a message from Beacon letting you know that your transaction has been broadcasted to the network:
Once you have clicked done, then the Dexter exchange itself will let you know once the transaction has been successful and you will be able to see your new updated balances, in this example: now including both XTZ and tzBTC:

Now that we have some XTZ and tzBTC we can now become a liquidity pool provider, a guide on becoming a liquidity provider in Dexter will be posted later on XTZ.News as part 2 to this Dexter user-guide series.

Important to note: When using the Kukai wallet, as you can access your funds via your Twitter account, it’s very important to ensure you have a strong Twitter password and security.

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