Trading Architecture

1. The Hybrid Trading Architecture of OPZ-DEX

OPZ-DEX introduces a groundbreaking trading architecture that fuses the off-chain Chronicle Matching Engine, a powerhouse capable of real-time order matching, with the impenetrable security and unwavering transparency of on-chain settlement.

1.1 Off-Chain Order Book and Matching Engine

The off-chain component of OPZ-DEX is important in ensuring high-speed trading and low latency, a necessity for professional and institutional traders requiring real-time execution. This component encompasses:

  • Chronicle Matching Engine: At the heart lies the Chronicle Matching Engine, which efficiently handles order matching, ensuring quick and fair trade execution. The engine supports many advanced order types and time-in-force options, accommodating various trading strategies.

  • Dynamic Order Management: The off-chain order book allows for dynamic order management, where orders can be placed, amended, or canceled almost instantaneously, providing traders with the flexibility to adapt to fast-changing market conditions.

  • Low Slippage & High Liquidity: The platform ensures deep liquidity by integrating with various liquidity pools and institutional market makers, thereby reducing slippage and offering competitive market rates.

  • Synergy with OPZ Network’s Layer-2 Solution: The integration with OPZ Network’s Layer-2 enhances throughput and slashes settlement times.

Integrating the Chronicle Matching Engine into our decentralized exchange (DEX) as an off-chain layer is a strategic decision that significantly enhances our platform's performance, security, and scalability.

1.2 On-Chain Settlement Layer

While the off-chain component optimizes for speed and efficiency, the on-chain settlement layer of OPZ-DEX guarantees the security and immutability of each transaction, a fundamental tenet of decentralized trading platforms:

  • Immutable and Transparent Settlements: Final settlement of trades occurs on the blockchain, ensuring transparency, finality, and security. Each transaction is recorded on the blockchain, providing a tamper-proof ledger of all activities.

  • Smart Contract Integration: The platform leverages smart contracts for automating settlement processes, ensuring that each trade is settled according to the agreed terms without intermediaries.

  • Interoperability with Layer-2 Solutions: OPZ-DEX's integration with the OPZ Network’s Layer-2 solution significantly enhances transaction throughput and reduces settlement times.

OPZ-DEX's hybrid trading architecture leverages the Chronicle Matching Engine for efficient off-chain order handling. It combines it with a secure on-chain settlement layer, setting new standards in the DEX space for speed, efficiency, and security. This innovative approach addresses the needs of high-frequency users.

2. Enhanced Order Types and Execution Mechanisms

OPZ-DEX introduces a sophisticated array of order types, addressing the needs of diverse trading strategies. These include:

  • Simple Orders: Market orders ensuring execution at the best available price until fulfillment or expiration.

  • Limit Orders: Executed at a specified price or better, providing traders with precise control over entry and exit points.

  • Worked Orders: Including sophisticated order types like Stops, Icebergs, and Pegged Orders, catering to advanced trading strategies.

These orders are further refined by Time-In-Force options like Day, IOC (Immediate or Cancel), FOK (Fill or Kill), GTT (Good Till Time), and GTD (Good Till Date), offering traders nuanced control over the lifespan of their orders.

3. Matching Engine and Priority Rules

OPZ-DEX, powered by the Chronicle Matching Engine, ensures fair and low latency order matching. The platform considers various factors like order type, price levels, and time of entry to prioritize orders. It incorporates the following features for seamless order execution:

  • Dynamic Tick Size: Each symbol within the exchange has a specific tick size, managed by Chronicle ME, ensuring accurate price categorization and level grouping within the Order Book.

  • Order Prioritization: Iceberg orders and other specialized order types are prioritized based on well-defined rules, ensuring transparency and fairness.

At the heart of our system, a robust event loop meticulously oversees interactions across diverse activities. These include:

  1. Handling user requests through Client Gateways,

  2. Managing internal timing for operations like executions and exchange hours (e.g., Good-Till-Triggered (GTT) expirations),

  3. Responding to order status changes (e.g., activation of stop orders or stop limit orders),

  4. Receiving updates from our centralized risk management regarding aggregated risk adjustments.

  5. Processing external market dynamics and reference data changes.

By sequentially prioritizing these events, we ensure that our Processing Pipeline addresses each accurately and quickly, thereby maintaining our platform's integrity and responsiveness. This integration represents a substantial leap in enhancing our platform's scalability and efficiency, harnessing the power of an advanced processing pipeline capable of precisely managing multiple order books.

4. OPZ Network Synergy

OPZ-DEX leverages the Layer-2 capabilities of the OPZ Network to push the boundaries of transaction throughput and privacy without compromising decentralized principles. Key integrations include:

  • zkEVM Integration: At the core of the Processing Layer is the zkEVM. This element introduces Ethereum's smart contract functionalities into Bitcoin's robust and secure framework.

OPZ Network

5. Governance

OPZ grants holders the right to propose and vote on changes to OPZ-DEX. To decentralize governance and provide additional utility by distributing power to the community once they launch. Giving back power to the community is one of the features of true decentralization.

Governance is built on the AAVE governance contracts and utilizes OPZ tokens to represent voting power. Proposals must pass a certain threshold and percentage of yes votes based on the type of timelock under which the proposal's subject matter falls.

Figure 1: Chronicle Software. Building an Exchange with Chronicle Matching Engine. [Technical Report]

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