Building Derivatives on StarkNet

  1. There is a huge dependency on oracles. You have certain exchanges like GMX, that are highly dependent on Chainlink and other oracles. And as we know, most of these oracles are still fairly centralized. You are dependent on the teams that are running these oracles.
  2. The second is that there wasn’t any open mechanism to lease new assets and offer incentives for people to provide liquidity to trade these assets. Rather, most listing processes within these derivatives exchanges are closed. So you never really actually know what it is that the community wants to trade. But if you look at centralized exchanges, like FTX, or Binance, they do try to check the pulse of the community.
  3. The last one was the factor of scalability, which is how you expand your solution in a way that your fee structure and your gas costs are negligible.
  1. virtual AMM: A Uniswap like AMM model, where you have a pool with two tokens. The vAMM creates a virtual token representing the swap of the actual virtual asset versus the other token, which is the collateral, which is usually a stablecoin. This model is efficient for smaller trades but is not highly suitable for high-frequency trading because it’s more expensive to trade on.
  2. Synthetix Model: Here you have synthetic positions on mutual assets. Those positions are tracked through an Oracle price, and you’re trading against a pool of collateral that absorbs the losses or gains within the overall protocol. You have some protocols built on Synthetix, and they use this model. This model is efficient to a certain extent, but it also socializes the losses towards the LPs, providing liquidity for the protocol.
  3. Centralized order book: It has been implemented in platforms like dYdX and other exchanges. You depend on market makers to provide liquidity and depth of market so everyone can trade comfortably as much as they want. But as the word says, these are centralized order books, which means it’s just the server running on AWS or Google Cloud. It doesn’t offer any capacity to be decentralized or censorship resistant. Moreover, we realize that it offers certain limitations on how much you can scale.
  1. Worker node
  2. Dispatcher node
  3. Consensus node
  • Someone sends an order to the node network
  • Then the dispatcher node lets the entire network know that there’s a new order coming in so that the network can go and match it
  • After that, the nodes that are the fastest in matching those orders and are going to be able to be included as part of the compensation and payment for that particular trade, or liquidation

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ZKX

ZKX

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The first perpetual futures exchange built on StarkNet that offers complex financial instruments as swaps.