Harnessing the Power of Limit Orders: A Comprehensive Guide to Our Arbitrum DEX Feature

The impact of DEXs on the DeFi ecosystem has been immense. Without a shadow of a doubt, they have catalyzed the decentralization of the ecosystem by providing transparent, secure, and censorship-resistant peer-to-peer transactions.

These exchanges granted users full control over their assets, removing the need for intermediaries and enabling genuine financial autonomy.

However, up until now, most of these DEXs were failing to offer true decentralization by relying on certain centralized features for their core operations.

One such example is the reliance on off-chain hosted order books, exposing them to censorship, manipulation, and downtime risks. In an effort to eliminate these centralization points, Dfyn’s Arbitrum DEX is offering On Chain Limit Orders.

Before delving into the details, it’s important to grasp the concept of limit orders.

What Exactly is a Limit Order?

A limit order refers to a trade where a user specifies market conditions for executing the trade. Two primary types of limit orders are based on price constraints:

1. Buy Limit: Executed when the price (Limit Price) is less than or equal to the highest selling price.

2. Sell Limit: Executed when the price (Limit Price) is greater than or equal to the highest selling price.

Early-generation DEXs utilized Centralized Limit Order Books (CLOBs), which employed Web 2.0 services to maintain order books. These books matched buy and sell orders using real-time sorting algorithms. However, on our Arbitrum DEX we are executing this entire process on the blockchain.

Understanding On-Chain Limit Orders

On-chain limit orders are blockchain-based orders specifying the maximum or minimum price for buying or selling an asset. These orders execute automatically when the asset’s market price matches the specified price, enabling trustless trading without intermediaries.

Benefits of On-Chain Limit Orders:

Several advantages come with utilizing on-chain limit orders:

Automation:

On-chain limit orders are executed automatically when the market price reaches the specified price, allowing for seamless and efficient trading without the need for a third-party intermediary.

Assurance:

With our limit liquidity being embedded on the curve itself, when the price passes a certain price point limit order at that point is bound to get filled. Without exhausting the limit order liquidity at that price point, the market price will not go further. Hence giving an assurance of order fill.

Transparency:

Because on-chain limit orders are executed on a blockchain, they provide a transparent and verifiable record of all trades. This can help to build trust and confidence in the market.

Security:

On-chain limit orders are facilitated by smart contracts, which provide a secure and tamper-proof way of executing trades. This reduces the risk of fraud and ensures that users retain control over their assets at all times.

Cost savings:

On-chain limit orders can help users to save on trading fees, as they do not require the services of a central authority to match buyers and sellers.

Accessibility:

On-chain limit orders enable users to trade assets on decentralised exchanges, which can be accessed from anywhere in the world with an internet connection. This can provide greater access to global financial markets for users who may not have access to traditional financial services.

Superimposed Liquidity:

By combining the two AMM models of concentrated liquidity and on-chain limit orders, we have created a hybrid system with both benefits. This will provide more depth and liquidity to the market, as well as precise pricing and reduced slippage for traders. It will also help achieve higher efficiency, deeper liquidity, and increased granularity in price.

Moreover, Dfyn introduces the Limit Order Token, an NFT representing ownership of a Dfyn exchange limit order. These tokens enable tracking, asset claiming, and usage in various yield strategies.

And the best part is that you can place an On Chain Limit Order on our Arbitrum DEX today by simply following these steps.