Encrypted Price Discovery is the process of determining the fair market value of a cryptocurrency asset through mechanisms that protect sensitive bid and ask information from exposure to other market participants before trade execution. This mitigates front-running and other forms of information arbitrage.
Mechanism
This is achieved using cryptographic primitives such as zero-knowledge proofs, homomorphic encryption, or trusted execution environments (TEEs). Participants submit encrypted bids and offers, which are matched confidentially without revealing their exact values until the trade is finalized and publicly settled.
Methodology
A privacy-preserving market design principle applied to trading systems, especially within decentralized finance (DeFi) and institutional crypto trading. Its strategic goal is to establish a more equitable trading environment by removing information asymmetries and enhancing transactional fairness and integrity.
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