An introduction to our development plan


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@damageDeGate

DeGate is the Ethereum Layer2 decentralized exchange

This article is a summary of DeGate’s development plan. Full details will be released to the community as a video in the near future, so stay tuned.

DeGate aims to be the best decentralized exchange based on Ethereum Layer 2, with a trading experience closer to that of a centralized exchange. This means greater capital efficiency, better market depth, and more reasonable token savings.

Currently, in an era of high transaction costs, the Automated Market Maker (AMM) mechanism is recognized in the market for its ease of use. However, with the implementation of Layer 2 and ETH 2.0, the cost of using the blockchain will be reduced by orders of magnitude.

We can better meet the basic needs of traders through order book operations with higher capital utilization, which is very likely to generate greater market demand.

Based on this recognition, DeGate adjusted the original development roadmap to prioritize the development and launch of order book trading, with the ultimate goal being a product structure where order book trading orders, MA and margin trading form the three key pillars of the DeGate Exchange.

Understanding DeGate Order Book Trading

There are good reasons why the backlog model has not taken off in decentralized exchanges, compared to the AMM model:

1. The depth of exchanges cannot compete with that of centralized exchanges.

2. Each pending and canceled order must be packaged on the line, consuming gas charges.

3. Infrastructure TPS is limited and transaction matching response is not timely.

In view of this, DeGate hopes to provide users with a smoother and more cost-effective order book trading experience with a uniquely designed Match Node (Layer 3) model. We have also designed a unique economic incentive model to encourage Makers to participate in the system as liquidity providers. Our design goals are:

Instantly place and cancel orders: response time as fast as centralized exchanges

Place and cancel orders for free: free to place and cancel orders at no cost

Free for Maker: including trading costs and gas costs

Direct trade for lessee: no pre-deposit required

The following is an illustration of the transaction experience process from the user’s perspective, after completing the process of moving assets from L1 to L2:

Taker (route 1 in the figure) does not need to deposit funds and can directly place a market order to complete the trade on L2.

Maker (route 2 in the figure) can place limit order after deposit without waiting. The limit order will immediately appear in the trade order book, and the trade can be completed when Taker takes the order. No fees are required for Maker for the entire process.

Main features of the DeGate architecture

Match node

The term Match node refers to a “Layer 3” specially designed by DeGate to optimize the user’s trading experience. He is responsible for placing orders, canceling orders, maintaining the order book and matching orders during user trading. The corresponding results are generated as proof of zero knowledge and submitted to L2 for possible batch verification.

The design features of the Match node are as follows:

1. Priority given to large orders

In our design, the lessee in a transaction bears the negotiation costs and the manufacturer’s gas costs. If a taker order matches multiple creator orders at the same time, the charges for multiple creators will be paid by the taker. Likewise, exchanges can also launch a dusting attack (since manufacturers place orders for free, attackers can initiate massive amounts of dusting orders at low cost). To resolve this issue, our match engine will implement a high order priority strategy. The order with the highest initial amount will be matched first among the orders of the same price.

2. Order cancellation compatible with off-line and on-line processing

The order cancellation operation is processed by default in the Match node at no cost, but some users may be concerned about the hidden dangers of centralized processing (for example, the Match node could be malicious and reject canceled orders from users. ). Therefore, the functionality of directly canceling commands on the chain is also provided by the protocol.

3. Prevent frontal execution

There is a possible situation where a user learns in advance that their order is matched through the pre-run Match or Mempool node API, and initiates a remove or disapprove operation before the zero-knowledge evidence. containing the corresponding transaction is settled on the chain, causing the transaction to fail due to insufficient user assets. To avoid such attacks, DeGate adds checkpoints to the Match node and adds a design for delayed removal.

4. API calls and open protocols

The functions of the Match node can be called through an API as centralized exchanges so that third parties can deploy and develop their user interface and focus on the operation of the user without worrying about the underlying implementation details. Additionally, third parties can independently deploy and operate their own Match node in the future. We believe that this development policy will make the DeGate protocol more robust and more open.

5. Proof of zero knowledge

Zero-knowledge proof is a method by which the Prover can convince the verifier that a certain assertion is correct without providing any useful information to the verifier.

Typically, each node performs the same calculation for each transaction in the block and checks whether their results are consistent with the results of other nodes in a blockchain system.

In other words, every transaction on the chain will be executed by every node, which is one of the main reasons for the relatively poor performance of the blockchain.

We don’t need to recalculate every time to verify the transaction, and it would effectively improve the performance of the blockchain if the computation only happens once for a single transaction and every other node does the verification. only when the cost of verification is much lower than the cost of computation.

Zk Rollup uses ZK-SNARK technology, which is essentially a technology that significantly reduces the cost of verification, generally by several orders of magnitude compared to the cost of calculation (from linear to constant or logarithmic).

Based on this same idea, the Match node also generates the batch results of the off-chain order match in zero-knowledge evidence, which is passed to L2 for verification. This should reduce the cost of the network on L2 by more than 10 times.

Super driving channel

Arbitrage trading is ubiquitous in a decentralized world, and arbitrageurs can quickly narrow the price difference between different protocols once they find profit margins. DeGate hopes to use what we call a super drive channel to bring the costs of trading arbitrage trades between order book trades and AMM trades close to zero. For arbitrageurs, this makes arbitrage between DeGate protocols more competitive than between third-party protocols, and for ordinary users, they will also benefit from better use of capital and better market depth.

Market strategies

DeGate will prioritize the use of proven market strategies, including:

Looking for a secure and low-cost decentralized exchange with backlog function

In the context of a rapidly developing Ethereum Layer 2 and ETH 2.0 ecosystem, DeGate will work with the community to focus on the essence of the transaction and user experience, continue to empower the Ethereum ecosystem, lower the threshold for mainstream users to conduct decentralized transactions and enable the technology and concept of blockchain to serve a wider range of people.

  • Liquidity Mining order book: DG tokens are only rewarded for Makers who carry out transactions proportionally.
  • Liquidity extraction for AMM: DG tokens are awarded to liquidity providers according to industry standards in liquidity extraction.
  • Referral program: UI providers such as KOLs and Wallet Provider UIs are rewarded with trading fee discounts and DG tokens in the initial start-up phase.

Looking for a secure and low-cost decentralized exchange with backlog function

In the context of a rapidly developing Ethereum Layer 2 and ETH 2.0 ecosystem, DeGate will work with the community to focus on the essence of the transaction and user experience, continue to empower the Ethereum ecosystem, lower the threshold for mainstream users to conduct decentralized transactions and enable the technology and concept of blockchain to serve a wider range of people.

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