Thread by @CBarraford

Order books are coming to @THORChain which will be the first time we've seen a multichain order book with native assets in DeFi history. Let's dive into what this means, its challenges, and how it benefits THORChain and the entire cryptocurrency as a whole.

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Historically, we haven't seen much for order books in general w/ DeFi. It is currently dominated by CEXs & this is largely due to speed. Most DeFi ecosystems don't have the performance needed for it. Its why dYdX is migrating to #CosmosSDK, & why Serum ($SOL) was built on Solana

But @THORChain's order book design isn't the same as those & is structured quite differently. The biggest difference is that orders are executed against the pools (CLP) of THORChain instead of peer-to-peer. Liquidity comes from the pools + orders, rather than just the orders.

To my knowledge, this is a novel approach in DeFi. But because TC secures external assets, it needs to ensure economic security, unlike ecosystem-specific implementations (ie Serum).

All non-native assets need to be in a liquidity pool, paired w/ $RUNE to keep the network secure

While traders can trade w/ any layer1 native asset, the network internally uses synths to maintain their $$ (& economic security) while the order is waiting to be executed. This means that not only will layer1<>layer1 orders be available, but also will generate 2x the pool yield

This also means that orders that are waiting to be executed will sit as liquidity in the pool (increasing the pool depths) while the yield generated from that liquidity goes to LPs, increasing yield.

Not only do order books increase the pool depths & liquidity, but also increase the trade volume. This is in part of having a more flexible and powerful protocol, but also because it expands THORChain to entirely new classes of trader types.

Single asset yield needs to drop first before this feature can be released, so no ETA as of now but is being actively worked on.
For more detail on the implementation, read the gitlab issue.
gitlab.com/thorchain/thor…