Flash Trade | What is Flash Trade (Lightning Trading)?

2023-12-02 14:00

Read this article in 10 Minutes

Flash Trade improves user trading experience through direct trading.

Original Title: "What is Flash Trade?"

Original Author: Kinetex Network

Translated by: Luccy, BlockBeats

Editor's Note:

Kinetex Network, a fully decentralized protocol based on Zk proof, has launched a new generation of dApp Flash Trade, which combines cross-chain resolution, Zk technology, and clearing system to allow users to directly exchange encrypted assets with professional resolvers (market makers), simplifying the entire exchange process.

This article is sourced from the official blog of Kinetex Network and will be summarized and compiled into the Flash Trade related article compilation. BlockBeats will continue to update this compilation. The following is the translated original article:

Flash Trade (闪电交易) is an innovative mode of Kinetex dApp. Let's take this opportunity to further discuss the advantages of this mode and the technologies adopted by the Kinetex team to achieve these advantages.

Through Flash Trade, users can directly exchange encrypted assets with professional parsers (market makers), which greatly simplifies the exchange process. Users only need to select the tokens they want to exchange and enter the required amount, and the parser can manage the transaction from there. When users agree to the exchange rate, they sign the order, allowing the parser to access their assets. Before executing the order, the parser must provide collateral that exceeds the order amount to ensure the safety of the user's assets in case the order is not executed on time.

Flash Trade is created by the Kinetex team after fully considering the key challenges facing the blockchain industry today. Although the liquidity aggregation model is useful for conveniently transferring assets across chains, it does not allow for instant trading. By leveraging native liquidity, Flash Trade can ensure fast execution times, fixed rates, enhanced security, and more.

Let's take a closer look at the most significant advantage of Flash Trade.

Speed

Speed is one of the most prominent advantages of Flash Trade. The working principle of this mode is to set a time limit for the parser to execute its selected orders, usually not exceeding two minutes. Within this time, the parser should complete the order, otherwise, the order will be liquidated. During the liquidation period, the order can be filled by the parser's collateral or by the liquidator, who will receive the parser's collateral as a reward (more information about the liquidation system can be found below). Therefore, users can receive their orders quickly every time. In addition, competition between parsers greatly speeds up this process. When they compete with each other, they are motivated to work faster, thereby reducing the time required to complete orders.

Security

MEV Protection

The next advantage is composed of several elements: immunity to MEV attacks, no need for bridges and third-party validators, and clearing systems. First, MEV is a well-known phenomenon that is increasingly discussed in the cryptocurrency industry. It stands for Maximum Extractable Value, which refers to the profit that validators can obtain by manipulating the transactions they validate and strategically conducting their own transactions.

Although it helps attract more validators by providing them with more profit opportunities to help maintain blockchain operations, it may also lead to a decrease in user experience as they may be subject to serious exploitation each time. To protect users from MEV attacks, the Kinetex team has decided to stop using validators and memory pools and instead adopt a direct peer-to-peer model. This became possible by using zero-knowledge technology, namely Zk proof. In addition, third-party validators are often hacked or compromised, which poses serious security risks even without MEV. Therefore, running the system without them is a great advantage.

没有新的 Wrapped Tokens

Translation:

No new Wrapped Tokens

Secondly, Kinetex has a significant advantage in allowing P2P order decisions: it eliminates the need for Kinetex to create new Wrapped Tokens. This is important because new Wrapped Tokens can lead to issues such as hacking attacks and liquidity freezes and fragmentation. Unfortunately, the crypto community still occasionally experiences bridging hacking attacks, highlighting the major security issues that have yet to be resolved in the industry. In addition, creating new tokens and locking assets in smart contracts while generating assets on different networks can exacerbate liquidity issues, especially for lesser-known crypto assets. Therefore, by choosing not to create new Wrapped Tokens, Flash Trade can prevent security risks associated with bridged cross-chain transfers and help improve liquidity between different chains.

Clearing System

Third, the fully decentralized, Zk-based clearing system is the final crucial component of Flash Trade, which helps enhance its security. The Kinetex development team designed this system to be open and public, meaning anyone can become a part of it and support the integrity of the Kinetex system. Clearers will check orders and find expired ones that the parser was unable to fill in time. Once such an order is found, the clearer can fill it, generate a completion proof, and claim the collateral assigned to that order by the parser.

Driven by the collateral of the liquidator, there is intense competition among liquidators to take action as quickly as possible. Therefore, Kinetex can ensure that all users execute transactions quickly and securely.

优惠的价格和无滑点

translates to

优惠的价格和无滑点

in English.

Another advantage of Flash Trade is undoubtedly the fee rate. In order to successfully compete with others, the parser needs to analyze user requests and provide competitive prices for users who are interested in them. Then, users can view different proposals and choose their favorite one. Therefore, all parsers actively provide the most favorable rates possible to maintain demand.

In addition, because users directly exchange with the parser after selecting the best conditions, there is no price slippage. Users get exactly what they want without being deprived.

Gas Optimization

The last substantive advantage of Flash Trade mode is gas optimization and gas-free process. Thanks to the innovative zero-knowledge technology used by Kinetex, transactions can be batch processed together. Therefore, Flash Trade mode reduces the number of individual transactions that need to be processed, thereby reducing the overall cost of executing each transaction, eliminating unnecessary gas payments, and saving time.

In addition, users do not need to pay gas fees themselves when using Flash Trade, because the parser will handle all operations to complete the order, including gas payment. This method creates a gas-free flow, allowing users to not store multiple native tokens in their wallets.