Bharbz

The shortcomings of centralized exchanges are well-documented. They require an intermediary for order book management and execution, are exposed to various security risks such as the retention of private keys, and ultimately are slower and more expensive than a DEX. However, one particularly useful feature of their design is the CLOB model, which lets users transparently match their orders with one another on a “price-time-priority-basis.” In short, the highest bid and the lowest ask converge to represent the current market price, and users have the option to cross this bid-ask spread to immediately execute the order. Given the transparency of this system, users can see market depth in real-time. While these features of a CLOB are quite powerful, they are difficult to implement within an on-chain system. This difficulty stems primarily from high throughput and low execution cost requirements of an order book. That is, in order for a CLOB to effectively operate on-chain, gas fees must b...