Hi "Evers"!
To celebrate the launch of the everything Exchange, we would like to share with you our thought process in designing and building the next-generation crypto derivatives exchange over a series of blog posts - where we were coming from, and where we think the industry should be going. We hope you enjoy reading them as much as we enjoyed building them!
Cheers and love,
The everything Team
Problems with the Current Generation of CEXs and DEXs
The cumulative innovations in crypto trading technologies have brought tremendous promises but also missed opportunities. For example, the advance of automatic market makers (AMMs) allows for the creation of on-chain decentralized exchanges (DEXs) for the first time ever. The adoption of perpetual futures contracts by centralized changes (CEXs) allows for the creation of off-chain markets for essentially any quantifiable indices.
Nevertheless, these potentially revolutionary innovations often remain segregated in their respective DEX/CEX silos. Consider the setup of most existing derivatives exchanges:
Exhibit 1: Setup of Existing Exchanges
CEX
Pros:
Generally very high-performance
For most users, CEXs serve as the "on-ramp/off-ramp" of the crypto world
Cons:
Lack of system transparency. Users can only trust - but not verify - that CEXs are doing what they claim that they are doing
Lack of business transparency. Again, users can only trust - but not verify - that CEXs are segregated from their parent company's liabilities.
Most if not all extant CEXs have trading businesses controlled by the same people and are trading against or front running their users.
DEX
Pros:
Permissionless
Cons:
Generally low-performance
Subpar user experience
Surprisingly low system transparency due to the need to use various on-chain scaling solutions
Tradfi Exchanges
OK these are so last century that we don't even know where to begin...
The Solution: Separating Trading and Custody
As you can see above, the pros of CEX are often the cons of DEX (and vice versa). CEXs and DEXs often try to solve each other's problems, but not necessarily users' problems. Wouldn't it be nice if there is an exchange that has the pros of both CEX and DEX i.e. a “grand union of everything” exchange?
That's precisely why we decided to build everything.
Instead of blindly worshiping any particular purist philosophy, our approach to the next-generation everything Exchange is a fundamentally hybrid one: to maximize user utility by separating trading and custody, hence allowing us to strike the right balance of DEX-caliber transparency, CEX-caliber performance and iron-clad risk management.
High-Frequency Off-Chain Trading
All user trades and internal transfers occur through our centralized order-matching engine, in a private and anonymous manner that protects users’ trading intellectual properties. Positions and account balances are updated and reflected on a real-time basis. Deposits can be made at any time as well. There will be no opportunities for MEV bots to front-run user transactions. (Part 4 of our blog series covers some of our unique trading features)
Transparent On-Chain Proof-of-Balance-Sheet (PofBS)
All user assets are held in on-chain smart contracts. A complete and transparent proof-of-balance-sheet (PofBS) is uploaded periodically (every 4 hours), during which all users’ total and withdrawable balances are s
ynchronized with the records on the centralized engine. Users can submit withdrawal requests (up to the withdrawable balance) to be executed at the next PofBS. Individual positions/trade records are never uploaded on-chain to preserve user privacy. (More about this in Part 2 of our blog series)
Rock-Solid Risk Management
Like all derivatives exchanges, everything supports leveraged trading in the form of perpetual futures contracts. The introduction of system leverage means exchanges are potentially vulnerable to market gap risks which are not adequately addressed with one-sided liquidation alone. We put in place many battle-tested measures to ensure the financial integrity, and hence operational continuity of everything under even the most extreme market conditions. (More about this in Part 3 of our blog series).
There you have it. It's really that simple.
"When you do things right, people won't be sure you've done anything at all."
- Futurama
Trade everything.