A DEX on Encointer to boost onboarding and inclusivity of the entire web3 space

As we have outlined in our blog post Introducing Encointer: Making Web3 Truly Inclusive, web3 - and therefore dotsama - faces a serious lack of inclusivity because tx fees are prohibitively high for the big majority of the world’s population.

While Encointer has developed a solution to this problem with its purchasing-power adjusted fees (besides sybil resistance), integration with other parachains is tricky because until recently this would’ve demanded nontrivial efforts for integration by other parachain teams - which in our experience seem to have different priorities to focus their dev teams on.

With @joepetrowski’s vision about the future of Statemin* (irrespective of the question if a Statemine should have its own DEX) I see a huge opportunity for Encointer to provide an onramp of the so far financially excluded population to web3 by opening an HRMP channel to Statemine and offering a DEX on Encointer. Assuming Joe’s vision becomes reality, this integration would only cause dev efforts on the Encointer parachain. Statemine would be untouched by what I’m proposing here.

Integrating Encointer and Statemine (to be followed by other parachains) through XCMv3 could allow people with

  • no spare capital at all (like the 60% of all humans earning less than 20$ per day)
  • no state issued ID (1.1 bn people) which would allow them to pass KYC processes by CEXes

to get hold of a tiny amount of any asset available on Statemine, which will soon include native tokens from other parachains, but also stablecoins or tokens from bridged blockchains.

How so?

  1. Bootstrap or join a local Encointer community where you live
  2. Participate in Encointer’s proof of personhood protocol to get community currency (CC) as a basic income
  3. Exchange the CC for a stablecoin or any other crypto asset on a DEX on the Encointer parachain itself and pay purchasing-power adjusted tx fees in CC

What’s in it for other parachains?

  • Use the Encointer DEX for sybil-resistant faucets and airdrops. (no implementation efforts, just an HRMP channel)

Why does the DEX have to be deployed on Encointer parachain itself?

  • Encointer cummunity currencies (CC) have very distinct features like demurrage which make them incompatible with XCM and any token implementation we know of in dotsama.
  • If we want to reach financial inclusion we need purchasing-power adjusted fees which Encointer can provide for payment of DEX sevices.

Encointer DEX Success Scenarios:

  • A parachain team wishing to extend its token holder base could transfer a stash of their (native) token to Encointer through HRMP and
    • offer it for sale in selected CC’s to extend the potential retail investor base to the long tail of the wealth distribution
    • offer an airdrop or faucet with sybil-resistance that can be claimed by providing Encointer’s proof-of-personhood reputation. (not exactly a DEX, but could be done alongside)
  • An NGO focusing on cash-transfer schemes (like givedirectly) could offer stablecoins to selected encointer communities in exchange for CC at a fixed rate. By doing so, they would back the CC at the same time and could multiply the impact per donation dollar as envisioned in our blog post Encointer as a development aid multiplier
  • obviously, the DEX could also be used to exchange different Encointer CCs so communities could effectively back each other. This use case, however, shall be out of scope for this post.

We’re not talking about a typical DEX here, yet the naming seems right. We don’t need deep liquidity pools to fulfill the success scenarios outlined above. The Encointer team isn’t specialized on DEX design and operation, so we’re reaching out to the pros out there and are open to suggestions how this could be done - and who could do the work.


I guess we should have the following restriction on otherwise freely selectable trading pairs for such a DEX:

  • At least one asset of each pair must be an Encointer CC
  • A small fraction of the trade (both assets?) will go to the treasury of the respective community

This will make it less attractive to use this DEX for general purpose trading (which is not the purpose of Encointer) or for short term fleeing demurrage.

And we will need pooling tools, such that a bunch of people with only a few mKSM equivalent can XCM to another parachain and participate in cutting edge defi with an offchain-multisig account

After looking into the most popular DEX designs, I’m quite sure we don’t want any AMM based DEX (like uniswap v2) for our purposes as the capital efficiency is just unattractive for our use case. We also don’t need the DEX to be ready to trade at all times and at all prices. More general reasoning here

A simple and easy to understand DEX with an onchain orderbook seems much more appropriate:

Types of orders:


  • for faucets: Offer crypto asset A at x per PoA (proof of attendance) of community CID


  • trading pairs where one side is any crypto asset that can be XCMed to the Encointer parachain. the other side is always an Encointer community currency

Nice blog post. Duniter is an other “UBI” project with sybil resistance, but we use a web of trust to provide global consensus on identity instead of local communities :

We are also thinking about the fees which can even be reimbursed under certain conditions for the accounts linked to an identity.