Feature comparison

The benefits $0X's trading infrastructure brings to DeFi not only superseeds current methodology but begins a new paradigm of onchain trading.

$0X's technology approaches DEX trading in a completely new way. Instead of having a smart contract with a list of functions users can use, the contract is an interpreter of strategies you feed it. These strategies will be posted to the blockchain and automatically executed when possible. These strategies have no limit in length, can ingest multiple price feeds, and tap into multiple markets. Moreover, as the strategy is already posted to the blockchain, the execution of these orders does not need to queue like a conventional order does.

In order to understand the benefits it is useful to compare to current models.

Automatic Market Maker introduction

The vast majority of decentralized exchanges are lacking in core functionality. For example, the stop loss – 99% of DEX's today do not allow the ability for this core order type. This highlights current DEX's shortcomings, but does not explain why this is the case. We will use the stop loss to highlight key differences.

The common approach in the market is to use Automatic Market Makers (AMMs) in the form of a singular bonding curve to handle the making of markets. A bonding curve is a mathematical formula used to handle the pricing and exchange of two assets, for example, BTC and USDT. The operators of the market will have to provide both BTC and USDT to the curve to create liquidity. As one token is bought more than the other, the price of that token increases in value.

Recent advancements in AMMs have allowed users to add concentrated liquidity so that they can add liquidity to desired parts of the curve. In addition to this, instead of requiring users to add both BTC and USDT, they can now just add one token.

Why you cannot use stop losses using this methodology?

This methodology is a very basic implementation of a working market. It simply provides a solution for users to be able to buy/sell at the point of the interaction and not much more. The addition of concentrated liquidity and single-sided liquidity can be used to mimic limit orders by adding USDT at price X, which will convert to BTC when hit. However, there is no function to then remove this liquidity after the transaction from USDT to BTC has been made. If the price traded back over this liquidity range in the opposite direction, BTC would trade back to BTC. The user would additionally have to monitor trades to then pull liquidity at the correct time. This is described as symmetric and reversible liquidity.

To go further and create a stop loss, a user would also require a 'trigger' to be activated to add liquidity on the correct side of a trade and then pulled after completion. Something DEX functions currently aren't enabling due to the extra gas cost.

What about Order book DEXs?

More recently, we have seen the release of Central Limit Order Book (CLOB) DEXs into the market. These have been greatly received by the community, now allowing users to create limit orders, however, this is where the benefits stop. The contracts for these have set functions that are limited due to gas. Approaching complex order types, variations, and ones that rely on each other as functions in the conventional way have a very high gas cost. Moreover, even within these more advanced DEX's, they still rely on simple bonding curves to manage liquidity within the order book.

How do $0X's features solve this?

As previously described, $0X's DEX is not a contract with a set of conditions for users to utilize but an interpreter of instructions and strategies you provide it. $0X will develop set strategies for users to use, such as stop losses in its order engine, allowing users to access advanced CeFi order ruling within DeFi in a gas-efficient manner.

The key features of this approach are:

• Asymmetric and Irreversible: individual user strategies may be composed of independent buy and sell orders that trade in a single direction and are therefore irreversible on execution.

• Concentrated and Adjustable: order conditions are pre-defined using specific concentrated ranges and may be updated on the fly without closing and recreating the order.

• Composable: multi-order strategies automatically shift liquidity between linked orders as they are filled, reducing the cost of manually creating orders.

• Connectable: strategies can connect into data feeds allowing them to act on singular or multiple token price movements.

• Re-usable: tokens acquired in one order become available for trading in a linked order once markets move into range.

• MEV-Resistant: trading is resistant to sandwich attacks, the most common form of Maximal Extractable Value (“MEV”).

These features enter DeFi into a new era of Programmable liquidity.

Programmable liquidity