Exchange
Introduction
The Exchange provides an automated order book based on Vault liquidity for on-chain environments. The Orderbook provided by the Exchange utilizes ALD(Algorithmic Liquidity Distribution) to granularly segment the liquidity held by the Vault into tick-by-tick increments on the order book, enabling trades to occur immediately as if in a swap. Thus, there exists a fundamental difference from traditional order book exchanges that rely solely on liquidity through limit orders. This can be understood as implementing an automated order book through ALD, making it more accurate to perceive it as a form of swap that provides the order book.
However, the Orderbook allows for specified price order trading and can reflect real-time market demand through limit orders. So it can also flow in additional liquidity from external sources through specified price orders atop the basic liquidity provided by ALD on the order book. Therefore, whereas trades on traditional swaps occurred within the LP pool's size, on an automated order book, liquidity from external sources via limit orders can be added on top of Vault liquidity according to market movements, providing temporarily enhanced liquidity.
Furthermore, the Exchange provides fully decentralized DEX services. Instead of users' order information being solely bound to a CEX, users tokenize their order positions, enabling them to have full ownership of their orders and reap the benefits of decentralization. Moreover, tokenized orders can be sold, transferred, or utilized as collateral, opening up new avenues of possibility. For detailed insights, refer to the OrderNFT section.
Trade 2 Earn
Similar to swaps, the automated Orderbook relies on basic liquidity prepared through the Vault, important of Taker's role in making market prices aligned with external evaluations by creating steady price movements. Thus, takers who trade with market price can acquire a certain amount of MECA proportionate to the trading volume for market orders by immediately earning 33.3% of the fees. Through this, the Exchange encourages active trading among users and ensures stable operation through continuous interaction with external markets. This helps in the process of making the Exchange's Price Oracle more sophisticated by allowing it to more accurately reflect the assessed value of each asset to ensure stable operation of the Exchange.
Life Cycle
Orders in the market follow the following life cycle.
| Process | Spot Limit | Futures |
|---|---|---|
| Before Filled | Pending | Pending |
| After Filled | Filled | Open |
| Close Position | - | Close |
| Liquidated Position | - | Liquidated |
About limit orders in spot and futures orders, when traders place an order, then receive an OrderNFT. In spot trading, Burning the NFT, allows traders to reclaim funds from the order by canceling the orders or receive traded assets from the completed order by claiming. In futures trading, burning the NFT closes a position and allows traders to settle contracted funds. In the case of liquidated positions, burning the NFT clears the position and settles debts, the receipt of MECA rewards.
Fees
All trades on the Exchange incur a 1% fee. However, with the Cashback system allowing direct acquisition of MECA and Credit Points enabling MECA-equivalent value utilization, the effective fee can be considered 0.66%. Half of this 0.66% is paid back to the stakers who stake MECA on the farm as compensation. Therefore, a properly balanced fee setting between traders and Liquidity Providers who expect liquidity management profits is necessary.
| Type | Fee Rate | Rewards | Credit Pts(Cashback) |
|---|---|---|---|
| Maker | 1% | None | 33.3% of Fees |
| Taker | 1% | 33.3% of Fees | None |
This may be considered higher than other Swaps, but Swap's trading method, which is generally represented by x * y = k, increases transaction costs by rapidly generating slippage to maintain the value of k, so it is necessary to understand that the costs incurred may be greater.
Therefore, trading on Swaps has lower fees for trading on most assets except for just a few assets such as ETH, DAI, and USDT, which can collect extremely high liquidity, but may result in larger losses in returns due to extreme price slippage. Sometimes rapid price fluctuations occur in new tokens rather than these tokens, and demand increases as more people trade new tokens to take advantage of the volatility. However, since most new tokens lack initial liquidity, trading in these situations can dramatically increase transaction costs due to extreme slippage.
Therefore, it's essential to consider whether it's more advantageous to bear slightly lower fees with potentially several percent higher slippage resulting in greater return loss or to pay slightly higher fees for more efficient trading, reducing transaction costs, and increasing returns.
For instance, if it's anticipated that the price of a newly listed asset will surge significantly, it might be more beneficial to incur slightly higher fees to reduce trading losses and acquire more tokens efficiently. In some cases, purchasing even a small amount of $10 worth of tokens at a lower price point could significantly impact future asset value appreciation, making it crucial to acquire more tokens efficiently at a lower price.
What’s the Difference?
vs Swap
Low Slippage
While Coinmeca DEX's Orderbook operates based on ALD(Algorithmic Liquidity Distributor), the interdependence between liquidity quantity and price is much lower compared to Swap. The Orderbook determines price by circulating ticks based on market logic independently of liquidity quantity, resulting in significantly lower price slippage. As a result, transaction losses decrease in the Orderbook, proportionally reducing as trading volume increases compared to Swap.
[insert slippage chart]
Swap, a widely used form of decentralized exchange in on-chain environments, simplifies transactions through the equation x * y = k. While this method somewhat reflects market consensus, price movements can be highly volatile compared to market demand. Consequently, lower liquidity leads to more drastic price fluctuations. This results in excessive slippage during trades, causing transaction losses to increase as liquidity decreases and trading volume rises.
Various Options
In conventional Swap, executing a transaction at a specified price requires constant monitoring of the current market price. However, Coinmeca DEX's Orderbook supports the option of limit orders. This means users can anticipate prices, place orders in advance, or adjust them before orders are filled.
In contrast, Swap only determines output quantities for input quantities based on equations. As such, it does not process trades sequentially like an Orderbook but rather reflects calculated prices in the market, making limit orders challenging. Consequently, users seeking to minimize transaction losses faced limitations when using Swap due to its inability to support price-based orders effectively.
MEV Attack Protection
Orderbook trading supports various order types, with limit orders particularly shielding traders from uncertainties in execution. Thus, users benefit from on-chain advantages while effectively mitigating risks.
In contrast, traditional Swap methods are susceptible to MEV attacks such as front-running and sandwich attacks, exposing users to additional risks beyond high slippage in large trades. Even small-scale traders must bear the risk of transaction losses stemming from MEV attacks.
vs Other Orderbook DEX
Offchain Orderbook DEX
Other Orderbook DEX platforms are often operated predominantly in off-chain environments, with trading matching occurring off-chain or outside the mainnet. While this setup typically results in lower transaction fees, as only the outcomes are reflected on-chain, it compromises decentralization and transparency. Moreover, due to their closed-listing policies, many of these platforms often restrict trading of newly emerging tokens that gain attention on-chain. Additionally, integration with other dApps within the mainnet ecosystem becomes challenging in such cases.
In contrast, Coinmeca's Orderbook operates entirely within an on-chain environment, allowing it to fully leverage the robust security of the blockchain ecosystem. Furthermore, it's designed to facilitate more complex financial products by considering interoperability with various dApps operating on-chain. This design not only enhances scalability but also provides diverse future potential.
Other Onchain Orderbook DEX
Decentralized and Transparecy
Coinmeca DEX's Orderbook is close to the form of CPMM Swap that has visualized the shape of liquidity deposited in the vault as the orderbook, and this is where the fundamental difference arises.
Most other Orderbook DEX platforms operate their order books and matching engines off-chain, even collecting and managing trade data in a centralized manner, undermining user data sovereignty. This compromises decentralization and transparency. Some DEXs attempt to address this on Layer 2, but those implementing order book matching engines on-chain have yet to successfully integrate CPMM and Orderbook organically.
Revenue Opportunities
In Coinmeca DEX, LPs can pay liquidity through Vault and aim to generate additional profits. Since ALD dynamically rebases the liquidity arrangement of the quote window according to the liquidity size according to market conditions, it distributes liquidity in the most optimized form so that liquidity can be utilized as much as possible. The larger the amount of liquid funds being utilized, the more active transactions are, which means that a lot of commission income can be generated based on efficient management of liquid funds.
However, in general, other on-chain Orderbook DEX platforms lack opportunities for additional revenue generation of LPs(Liquidity Provider) by liquidity provision, thus It was insufficient to meet the needs of various market participants.
Smooth matching
DEXs attempting to implement Orderbook on on-chain face slow matching in low TPS of blockchain network environments, heavily relying on trading demand alone, resulting in empty order books. This impedes smooth trading and leads to a downward spiral of decreasing trade volume.
The automated Orderbook based on ALD provides a seamless trading experience by utilizing the prepared liquidity as its foundation, enabling immediate transaction execution. Additionally, it accumulates liquidity from limit orders originating from actual demand in the market, concentrating liquidity near price levels where real demand occurs. Consequently, liquidity becomes more abundant in specific ranges based on actual trading demand, fostering active trading and reducing price slippage. With this process, the pricing accurately reflects the real market demand.