System
Tx Swap is a fully permissionless trading protocol that utilizes Batch Auctions as its price discovery mechanism. The protocol maximizes liquidity by utilizing the Coincidence of needs and taps into all available on-chain liquidity when necessary.
Batch Auctions are run continuously by the protocol. Solvers, the parties responsible for identifying the most optimal settlement for the batch, compete to settle it. The winning solver is the one that can maximize trader surplus either by having the most optimal needs, finding the best liquidity sources, or combining both in a single settlement.
Txs are settlements that share liquidity across all orders with matching limit prices. Tx Swap uses batch auctions, not AMMs or CLOBs, as a core mechanism to facilitate Tx Swap. This use of batch auctions results in better prices for individual traders, as well as significant savings in terms of gas fee optimization and liquidity provider fees.
Moreover, due to the uniform clearing prices of Batch Auctions and the fact that do not require access to on-chain liquidity, Tx Swap can offer users a degree of MEV protection that is unmatched by other protocols.
Instead of relying on a central operator or a constant function market maker to determine trade settlements, Tx Swap employs an entity known as a "solver". This party is responsible for providing the settlement solution for batch auctions. Solvers compete against each other to submit the most optimal batch settlement solution. Whenever a solver submits a successful batch settlement solution, the protocol rewards them with tokens. This means that the protocol incentivizes solvers to solve the batch auction optimization problem.
Anyone can become a solver, although there are certain requirements to do so:
An Ethereum address needs to deposit a bond in the form of tokens to become a solver. The specific type of assets and the amounts are yet to be defined by the Tx DAO.
Once the tokens have been staked (locked up), the Tx DAO has to vote to either approve or reject the Ethereum address that will represent the solver. If the vote is successful, the solver's Ethereum address will be included in the allowlist (verification) solvers contract.
Additionally, a solver must possess the technical knowledge to create the appropriate batch settlement solutions or risk being slashed by the Tx DAO for any wrongdoing.
Trading Cycle
While we call Tx Swap a META DEX Aggregator, as it may have similarities with current DEX aggregators or DEX trading protocol, Tx Protocol introduces a completely new way of trading. In comparison with other DEXs or DEX aggregators, Tx swap, and therefore the interfaces built on top of it, don't require the user to send a transaction to submit a trade, but rather require the user to send a signed message. The reason for this is that the protocol works with off-chain messages, where the trader signs an order with the valid parameters they are willing to accept. This signed order is later picked up by the solvers and executed in the batch auction that satisfies the user-signed requirements.
Let's take a high-level view of how the trading cycles work within the TX Swap protocol:
To enable trading for a specific token on the TX Swap platform, users are required to approve the contract allowance manager. This initial interaction incurs a transaction fee, but it only needs to be done once per token. Once approved, users can trade that token without incurring any additional transaction fees.
TX Swap empowers users to place limit sell/buy orders off-chain at any time by simply signing a message that contains their trade details. Users do not pay gas fees for posting and canceling orders. However, there is a protocol fee that users pay to cover the solvers' role in settling the transactions.
Solvers within the TX Swap protocol pick up the off-chain orders and settle them through a batch auction process. At the beginning of each batch, all currently open orders on the protocol are taken into consideration.
During each batch, solvers engage in an open competition to submit order settlement solutions. The protocol selects the solution provided by the solvers that maximizes trader welfare and offers the best clearing prices for the orders within that batch.
Matched orders within a batch can be settled either off-chain using the liquidity derived from the coincidence of wants across orders or on-chain against AMM/aggregator liquidity.
From a user's perspective, a complete trading cycle on the TX Swap protocol involves three user actions: approving the Allowance Manager Contract, signing the order to be placed, and enjoying the tokens obtained through the trade.
In conclusion, we firmly believe that the TX Swap protocol plays a vital role as critical infrastructure for open finance. As more tokenized assets are created, a reliable trading mechanism that prioritizes the best interests of users becomes increasingly essential.
TX Swap is driven by the spirit of permissionless innovation. Its fully decentralized architecture ensures that users are not solely reliant on TX Swap to build upon the protocol.
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