An Onchain Central Limit Order Book (CLOB) represents a decentralized exchange (DEX) model where the entire order book, including all limit buy and sell orders, is recorded, managed, and matched directly on a blockchain’s ledger. This structure brings traditional exchange functionality to a transparent, immutable public network, ensuring verifiable order management.
Mechanism
Users submit digitally signed orders as transactions to a smart contract, which functions as the CLOB’s matching engine. This contract maintains the order queue, prioritizing orders based on price-time priority. When a match occurs, the smart contract atomically settles the trade, transferring assets between participants’ wallets without intermediary custody. Every order placement, modification, and execution is a verifiable on-chain event.
Methodology
Designing an Onchain CLOB focuses on optimizing smart contract logic for gas efficiency and minimizing transaction latency to compete with off-chain systems. Scaling solutions, such as optimistic or zero-knowledge rollups, are often employed to increase transaction throughput and reduce costs. The objective is to achieve a balance between decentralization, transparency, and the operational performance required for liquid and efficient markets.
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