A new exploration of DEX, how Gridex Protocol deploys a fully chained order book in the ETH ecosystem

In the time when the concept of DeFi is becoming more and more popular, how to build a DEX with better user experience and lower cost has become one of the goals that many teams are tirelessly pursuing.

Looking at the current encrypted asset trading market, the order book is still the most widely used trading method. Based on this, the Gridex Protocol team launched the on-chain order book trading protocol. Gridex Protocol is based on the ecological construction of Ethereum and has been launched on Arbitrum. It will support Optimism, Polygon and other networks in the future and create a cross-chain network to achieve order book transactions on the entire chain network.

Different from existing order book solutions, Gridex Protocol fully deploys the order book on the chain. Compared with dYdX, which implements the matching engine and off-chain order book through zk-Rollups, and EtherDelta, which maintains the order book under the chain and settles orders on the chain, it has stronger decentralized properties.

New DEX under the framework of dual-model algorithm

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Before the implementation of Gridex Protocol technology, mainstream DEXs generally adopted the AMM model, but it still had many shortcomings, which blocked a large number of users from the door of DeFi, such as impermanent losses, high slippage, and so on. Of course, Uniswap also launched the V3 version in May 2021 in an attempt to improve the shortcomings caused by the characteristics of the AMM model, but the effect was not obvious.

In fact, Gridex Protocol's Grid Maker Order Book (GMOB) model and Grid Price Linear Movement (GPLM) algorithm may become A solution to improve this deficiency.

In CEX, the CLOB model is usually used as the matching engine algorithm, but the CLOB model consumes a lot of resources, which also causes the model Unable to deploy and run on a blockchain network. The GMOB model of Gridex Protocol has improved the problem of CLOB used by CEX that consumes a lot of resources, making it possible to chain the order book.

In the GMOB model, the user's pending order (Maker) will be limited to an extremely narrow price range based on the percentage. Not executed immediately, but added to the system order book. Similar to CEX, since pending orders increase the liquidity of the entire system, Gridex Protocol will reward users with pending orders, that is, negative transaction fees.

The GPLM algorithm mainly deals with transaction execution and settlement, and is mainly used to measure the Token price within a certain price range A linear proportional relationship between the resulting price change and the number of Tokens purchased.

GPLM algorithm operation case< /blockquote>

After using the GPLM algorithm, even if all transactions are on the chain, the gas consumption of Gridex Protocol is the same as that of Constant Function Market Maker (CFMM) At the same level, there will be no higher cost burden on users.

Gridex Protocol has obvious advantages in user experience

At the beginning of DEX development, no threshold, decentralization, transparent transactions, etc. are the highlights that attract users. After several iterations and developments, DEX focuses more on improving the user experience.

With technological innovation, Gridex Protocol provides a smoother transaction experience and lower cost advantages.

According to the actual measurement, the cost of using Gridex Protocol to conduct transactions is the same as that of Uniswap V3, both around 120k gas, while using Gridex Protocol to complete Pending orders and Collect Maker Orders can save about 60% of gas costs compared to Uniswap V3's liquidity addition and liquidity removal. This means that the cost for users to use Gridex Protocol Protocol is about 40% of that of using Uniswap V3.

Source: Gridex Protocol

Gridex Protocol pending order system provides users with 3 granularities of 0.01%, 0.05% and 0.3% to choose from. For trading pairs such as stablecoins, users can choose a finer-grained model to facilitate quick transactions. For tokens with high volatility, users can choose options with coarser granularity to obtain more generous rewards for pending orders. In short, the granular option of the Gridex Protocol pending order system is trying to strike a balance between transaction efficiency and fee income.

Source: Gridex Protocol

Compared with dYdX, one of the largest decentralized derivatives trading platforms, Gridex Protocol is also more decentralized. The order book model of off-chain transactions and on-chain settlement adopted by dYdX has certain centralization risks. At the same time, dYdX's ability to interact with cross-protocol liquidity is also somewhat weaker than Gridex Protocol.

Of course, Gridex Protocol is not a flawless protocol, but more of a new DEX solution. More advantages and applications still need to be verified by the market. Based on this, the D5 Exchange integrated with Gridex Protocol is officially launched.

The first dApp D5 Exchange on Gridex Protocol will aggregate AMM and order book DEX

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D5 Exchange is the first dApp on Gridex Protocol. The underlying technology based on Gridex Protocol aggregates the liquidity of the entire network DEX and further supports the order book model transaction.

As we all know, due to its characteristics such as impermanent loss, AMM has a comparative advantage on platforms such as Curve, which are mainly used in stable currency transactions. great development advantage. However, it is not applicable to Token and derivatives transactions with large price fluctuations. At this time, the order book will be a better choice for users.

Of course, AMM and order book are not antagonistic. The emergence of D5 effectively combines the two modes and complements each other. D5's automatic router aggregates liquidity from mainstream AMM DEXs such as Curve, Uniswap V2 and V3, and at the same time integrates pending order liquidity from users through Gridex Protocol. In other words, it can be considered that D5 will have the opportunity to become one of the most liquid DEXs currently on the market.

For the project side, D5 supports any project to start on its platform, and the project side can add smart contracts to the currency at will, and There is no need to create LP Token to provide liquidity first, only to create pending orders. Undoubtedly, D5’s method of aggregating AMM and order book DEX reduces the need for liquidity provided by Token trading market makers, and is more conducive to the low-cost cold start of the project.

In general, the emergence of D5 has brought a new development direction for cryptocurrency trading. By combining the advantages of AMM and order book, D5 breaks the limitations of traditional trading and realizes a more efficient and flexible trading experience. By aggregating the liquidity of the entire network, D5 can obtain the best price transactions for users. At the same time, D5 is also rich in functions and highly customizable, which can meet the needs of different users and inject new impetus into the development of cryptocurrency transactions. In addition, D5 also has some distinctive features.

In traditional order book trading platforms, matching is generally implemented in memory, so all orders under the current price list are buy orders. Both above and above are sell orders, and D5 can realize the scenario where there are buy and sell orders above and below the current market price. Pending order users provide liquidity for D5, waiting for taker users to passively trade when taking orders. At the same time, in order to prevent Token price fluctuations from exceeding the system's carrying capacity and price manipulation, some platforms often do not allow users to place orders with prices that deviate too much from the market. This also leads to that when the Token price fluctuates violently or even the black swan arrives, the user's pending order cannot be executed. The D5's deflectable handicap pending order function can enable users to obtain greater benefits when the fat tail effect occurs.

Currently, Gridex Protocol and D5 have been listed on Arbitrum and the second round of airdrops has started, and this is just the beginning. The goal of Gridex Protocol has always been to replace CEX. According to the development roadmap, Gridex Protocol is expected to launch the PoS mainnet in the second quarter of 2024, support the current mainstream Layer1 and Layer2, and complete the implementation of the cross-chain order book, and D5 will also become a DEX that gathers the liquidity of the entire network. This provides an opportunity for DEX to replace CEX, making DEX expected to become the mainstream trading method in the future.

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