Automated Order Books Eliminate DeFi Costs and Match CEX Capacity


The decentralized finance (DeFi) sector continues to reach all-time highs, with daily transaction volume steadily increasing. Unfortunately, despite the billions of funds currently traded, decentralized exchanges (DEXs) are filled with both visible and invisible costs that hamper market activity.

Therefore, the future of DeFi requires eliminating the high transaction costs and limited functionality often associated with traditional DEXs. Among them is slippage, the price difference between the quote price of a cryptocurrency and the price actually paid by the trader. This is in addition to limited liquidity, high gas costs, lack of control over the price of execution and the risk of front-run, which is the act of malicious traders placing a trade before a trader based on privileged knowledge of their future transaction. Fixing these issues means DeFi could achieve parity with centralized exchanges (CEX), while removing the need for intermediaries.

For example, regarding order book functionality: centralized trading venues typically sort limit orders by price, from highest to lowest. The BTC/USD trading order book, to name just one pair example, will contain all buy and sell orders that have been placed on the exchange at different prices (limits).

At the top of the book, users can find the highest bid for BTC, and at the bottom, the lowest asking prices; the middle of the book, where bids are closer to asks, will help determine when a new market order will be executed. Slippage occurs when a market trade is greater than the amount available at the first level of the order book, or also when the bid and ask prices change before the exchange can execute the market order. Slippage basically means that the merchant is paying more than expected for their order.

Currently, all DEXs on DeFi only support market or spot orders, which means that when a trader trades, they are at the mercy of market conditions, a factor entirely beyond their control. In DeFi, this concern is increasingly significant given the sometimes extreme volatility of the market.

To mitigate the impact of volatility, investors using centralized exchanges often execute a limit order, where the required target price is predefined as a condition for the trade. The larger the size, the greater the advantage of a limit order over a market order. Unfortunately, executing a trade of this type was previously not possible in a decentralized environment.

From human to automated

DeFi platforms currently primarily offer market order functionality, with no order book or limit order capability. Much to the surprise of users, the “limit orders” offered by DeFi platforms are simply executed as delayed market orders, with all the associated costs and implied inefficiency. While limit orders are the mainstay of centralized exchanges, attracting significant human labor to enter and execute them, they have been lacking in decentralized exchanges.

The appeal of DeFi is to democratize market making on the blockchain so that any user can provide their own liquidity and allow anyone to submit a buy or sell order through automated and intelligent trading networks, which ensure that any merchant can participate equally. However, letting traders specify their target price while avoiding slippage and other costs has been a challenge in DeFi so far.

Despite their efforts, DeFi platforms have generally provided only basic automation through smart contracts. DEXs line up buy and sell orders, match and resolve trades, only failing to deliver the liquidity experience users expect from a centralized exchange. Therefore, if DeFi is ever to become the alternative to traditional finance, a solution that involves instant order books is needed.

Permanent removal of DeFi trading costs

By using a DeFi order book, which is fully automated and decentralized, traders can finally avoid transaction costs on traditional DEXs. With their patent-pending solution, Civil trade provides a service that allows anyone to access the benefits of DeFi while maintaining equivalence with the features found on centralized exchanges like Binance while offering zero price impact, zero fees, and even paying revenue from traders while their order is open.

Using CivTrade DApp, investors can not only execute market orders, but also limit orders to their preferred target price, without any slippage, liquidity fees or other negative price impacts previously found on other DeFi platforms.

This solution supports more than 4,000 tokens on the Ethereum (ETH) blockchain and 1,000 on Polygon (MATIC), and eight wallet providers; regardless of their preferred pair or price, traders can rest assured that every trade is centered on the exact target price thanks to CivTrade’s implementation using a one-sided liquidity pool for every trade. This not only eliminates costs but also pays liquidity fees to traders. Thanks to the carefully crafted design of the system, the DApp has already traded $10 million, including an average gain of $1,820 per trade compared to using a centralized exchange or other DeFi platforms.

In the words of the Civilization team, “DeFi is the future, and CivTrade removes the need for any market making desk or OTC for good. By automating the order matching process with a scalable and anonymous solution at a cost sucks for traders, CivTrade marks the turning point where DeFi anyone can finally achieve everything a centralized trading exchange used to offer, but better, faster and cheaper.

The team has since introduced CivTrade ProView, with the ability to turn DEX data into actionable insights, in what the team can only describe as an engineering “mini-miracle”. With ProView, users can enjoy the benefits of an automated order book, interactive charts, and live page order execution.

CivTrade is just the first of Civilization’s planned products. Future projects include CivFarm and CivFund, both of which will further improve the accessibility of DeFi.

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