Dan Hughes | Radix Profile picture
Nov 15, 2022 15 tweets 8 min read Read on X
Thanks #ftx, #dex vs #cex debate is hot again in #crypto

I've spent many years thinking about #dex implementations & building prototypes.

Lets dive in a little & explore the possibility of replacing #exchanges with #decentralized alternatives today

A small thread 🧵
1) Firstly we need throughput, lots & lots of it. A popular exchange such as @binance is likely performing 10,000s of trades per second across 100s of pairs.

A few years ago this kind of throughput was a dream, but not so much today 💪
Our consensus mechanism at #radix could handle that level of throughput, other projects are also approaching that tipping point too.
2) Finality is second. All #dex implementations so far have been low frequency trading only, partly because of throughput, but also because of the consensus protocol itself having long (or probabilistic) finality periods.
There are a number of protocols around today that can perform finality in <10 seconds, ours included, which allows us to have medium frequency trading.

This is probably enough for most users, hardcore day-traders need high frequency trading, which requires sub-second finality 😞
For that you're going to want to use traditional exchanges, or at best protocols with a very low #decentralization quotient.
3) Order books! #uniswap type #dex solutions are great, but they come with a bunch of limitations & issues.

To be a serious competitor to #cex dominance, a #dex must offer many of the same features. An order book is simply a must along with a trade matching engine.
A huge advantage an order book based #dex with a matching engine has is that a number of issues disappear such as MEV, front running and sandwich trades 🔥
4) Shorts 🧐 Order books allow short trades to be performed YAY! 🎉

However, there are a bunch of collateral/liquidity risks to consider if the short doesn't fill.

Solutions for those risks fall outside of the purely technical domain and are probably a headache 🤬
5) Stop losses 🤬 This one is a real nightmare & over the years I havent been able to find a viable solution for it. On a #dex your stop loss will be public.

The market knows where your stop loss is
and can potentially take advantage of that information. 😒
Ya'll can debate if that is a good thing or not as the market is now totally transparent.

I haven't revisited this issue for a few years though, advances in #zkps probably offers a solution. 🧐
6) Fiat off-ramp 🤬 These are still going to need a #centralized entity.

I did have some ideas for #social #decentralized #offramps but they were rife with KYC/AML issues.

Maybe there is a solution in the long term, but for now we're stuck with #centralized solutions. 😭
7) Conclusion is we're not *quite* there yet 😞

The main issues revolve around shorts, stop losses or any other trade classification where "the future" is involved.
Maybe it's fine to not support those features & day-traders remain on the #cex with everyone else inc retail using a #dex

Perhaps it's time to revisit these technical challenges that remain, tech capability here at #radix and elsewhere is moving forward quickly.
Either way, I don't think we will see #dex implementation that begin to challenge #cex implementations for a little while 🤬

Although, perhaps you can sleep a bit better at night knowing their days are probably numbered 👍

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More from @fuserleer

Jun 5, 2022
I've been v.quiet lately as I'm laser focused on #cassie cleanup, improvements, testing etc but it's going well.

Starting to get some tangible results that are interesting to the #crypto crowd so thought I'd share in a thread ⚠️
Some background first.

The #cassie code base before starting this work was a real bloody mess!

My focus was to find a solutoon/implementation that worked, not to write clean, pretty, fast code.

Hacking around with ideas & progressive theory produces terrible code.
So much so that even though I'd proven out the theory to mine (and others) satisfaction, running long tests was prone to crashing because some no longer used code was being called somewhere deep in #cassie belly under some edge condition. V. Frustrating!
Read 8 tweets
May 15, 2022
Ran the test for an hour ... total SUCCESS!

Here's a breakdown 🧵

#cassie #web3 #blockchain #crypto
Purpose of the test is to ensure that #cassie can support at least validator set sizes of 100.

100 validators provides an acceptable level of security, decentralization etc ... more is always better OFC.
As #cassie is the first leaderless multi-decree #BFT it's a critical test! Until now it's simply been theory and a hunch that this would work for over 18 months.

To make things "worse", the test itself is configured to be HORRIFIC, with parameters WAY outside nominal.
Read 13 tweets
May 12, 2022
⚠️ ALERT BRAINDUMP

Survival of any stable coin, whether its a peg, or a free floating currency really comes down to one problem.

Given a trading pair A/B and some level of volatility, what is the level of volatility at A and at B
If B is intended to be "stable" and you know the volatility metric then you can act accordingly, removing or adding supply via some mechanism.

You might be duped into thinking its easy, if the price now is 5/20 & the price before was 10/20 then A has doubled in value, right?
Wrong, B might have halved in value & A hasn't changed at all.

The price alone, even looking at some history doesn't give reliable signals as to value movements of either assets.

The price at the least is a conflated, obfuscated representation of value changes in both assets.
Read 8 tweets
Feb 21, 2022
There's a lot of questions about #cassie, what is the significance, why is it cool, what does it demonstrate, how is it #web3. Even moreso since the #radflix demo dropped & the exposure it got on various socials etc so here is a thread...
Hopefully yall know by now that it is primarily a research network. It started as a collection of radical ideas around #consensus, #sharding, #blockchain and #cassie is the embodiment of those ideas to demonstrate viability. But it has now become so much more...
It is technology that can do things that were said to be impossible. Technology that can do things other L1 tech hasn't even dreamt of trying to do. It is a technology which is being used to show proof of potential on all the *hardest* things first...
Read 10 tweets
Mar 27, 2021
Throughout the day a few folks have correctly noted that there are indeed hybrid consensus platforms such as $dot #symbol #eth2 & others.

However there's a subtle but important difference in #cassandra that perhaps warrants "hybrid" as the incorrect term.

Clarification then...
As far as I understand, these solutions are essentially two separate consensus mechanisms.

Probabilistic to perform state transitions, with deterministic to finalise the best version of the former.

It works & does the job required, so why is #cassandra different?

....
Think of a hybrid car. There is a petrol engine & electric motor working together to move the car.

They are 2 separate systems & are open loop, one way. The engine if needed can generate electricity for the motor, but the motor doesn't produce anything useful for the engine...
Read 15 tweets
Mar 27, 2021
One key area of research I'm doing with #cassandra is testing hybridization of deterministic & probabilistic consensus models.

Successfully doing so would provide an almost "best of both worlds" type model.

...
Probabilistic (#nakamoto) has strong liveness guarantees but is never really safe.

Deterministic (classical) guarantees safety but is difficult to resolve both liveness and safety issues. Usually requiring some #godmode
The #cassandra approach has 2-phases.

The 1st phase is probabilistic promoting liveness to a strong guarantee.

The 2nd phase receives the output of the 1st phase and produces a classical 2f+1 safety threshold.
Read 8 tweets

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