Orbs’ new TWAP protocol is aimed at decentralized exchanges and automated market makers

Layer 3 Decentralized Orbs have announced the launch of a new Decentralized Average Price Protocol (TWAP), which will support new order types across decentralized exchanges and automated market makers (AMMs).

TWAP is a term borrowed from the Central Finance (CeFi) scene and is commonly used by CeFi Exchanges as an algorithmic trading strategy to reduce the impact of high market demand. Basically, this type of trading strategy is implemented by dividing a large order into several smaller trading units, which are subsequently executed at regularly specified intervals during a certain period.

Although TWAP works seamlessly across most of the CeFi exchanges that adopt this concept, it is quite the opposite when the same is implemented across the existing DeFi infrastructure.

Despite its growth in a multi-billion industry, the DeFi ecosystem still faces some flaws in its existing infrastructure, including the limitations of EVM smart contracts, in this case, by making it difficult to implement TWAP in a decentralized format. This is in addition to the fact that there are very few features designed to manage the increased volatility and liquidity issues that often unfold in the decentralized crypto economy and the DeFi ecosystem in general.

To address these issues, Orbs decided to adopt a new approach in implementing TWAP, particularly via decentralized exchanges and AMMs. Specifically, Orbs’ new TWAP protocol is powered by its layer-3 technology, which is designed to eliminate the aforementioned shortcomings posed by EVM smart contracts while benefiting traders and decentralized trading platforms alike.

In addition, Orbs’ decentralized back-end not only allows for splitting of large orders, but also ensures that all TWAP orders are executed at the optimum price regardless of volatility and at a fair fee without sacrificing decentralization and security. With this in place, participating DEXs and AMMs provide their clients with new ways to engage in complex trading activities, particularly leveraging algorithmic strategies like those used in CeFi, while also seeing increased liquidity and user activity.

It gets even better, as the protocol also allows users to take advantage of a feature known as Dollar Cost Averaging (DCA), an investment strategy where investors buy an asset or group of assets at a specific legal value on a predetermined schedule. However, unlike how DCA is practiced manually in CeFi, the TWAP protocol can also be used to implement an automated version of the DCA trading strategy, thus enabling traders to enter market orders with longer and extended intervals.

In general, the concept behind TWAP is not entirely new; However, technically speaking, Orbs’ Layer 3 infrastructure extends the capabilities of existing EVM smart contracts to accommodate the long-established trading strategy in the DeFi ecosystem. In other words, by utilizing network validators as off-chain bidders, the Orbs TWAP protocol enables DEX and AMMs to unlock new opportunities in a completely decentralized and secure manner.

In addition, Orbs’ TWAP smart contracts work in a similar way as we have at CeFi, and consist of two main components: a market maker and a market trader. While the “manufacturer” (the user or the originator of the order) controls all parameters related to the order, such as the exact price, volume, expiration, and period, the “beneficiaries” on the other hand, are catalytic participants tasked with monitoring orders.

What’s more, the “recipients”, such as the validation of the contract, are chosen to carry out the trade, the process that takes place after bids for orders are submitted by the “makers”. In this case, the highest bid and lowest fee for execution are determined automatically.

Supporting the new initiative is a new User Interface (UI), which the Orbs team intentionally designed to enable DEXs and AMMs to seamlessly integrate with their existing infrastructure. Likewise, end users can equally benefit from the new user interface, which is intuitive and easy to use, eventually allowing them to easily navigate and customize each parameter while initiating TWAP deals.

Speaking about the newly launched products, Orbs CEO Nadav Shemesh outlined the need to explore and adopt some of CeFi’s features including TWAP, as they are keen to enhance the stakeholder experience.

“Until now, it has been very challenging to implement the TWAP strategy in blockchain-based financial priorities in a decentralized manner using EVM-based smart contracts. With our new TWAP protocol, everyone benefits – whether they are merchants or trading platforms.”

“Besides better liquidity management, support for more sophisticated trading strategies, automated DCA orders, customizable parameters and more can help us attract in-kind institutional participation,” said Naddaf, explaining the need to introduce the TWAP protocol.

About the celestial bodies

Orbs are a public, decentralized blockchain infrastructure that runs over a secure network of unauthorized validators and a Proof of Stake (PoS) consensus mechanism. The platform acts as a decentralized execution layer between the existing Layer 1, Layer 2, and Application Layer chains. By enhancing the capabilities of EVM smart contracts, Orbs is powering new use cases for DeFi, NFTs, GameFi, and other emerging blockchain-based sectors.

Source link

Related Posts