Switcheo TradeHub is a fully decentralized layer 2 cross-chain trading protocol built by Switcheo Labs, designed specifically to support trading of sophisticated & advanced financial instruments such as options, bonds and futures, at scale.
Switcheo TradeHub is a custom-built sidechain that utilizes underlying technology from Cosmos Tendermint Core comprising:
As a layer 2 protocol, Switcheo TradeHub operates as a secondary framework that runs parallel to Layer 1 chains (i.e. Ethereum, Neo), functioning independently while remaining anchored to their security. This enables faster trades, lower fees, support of sophisticated financial instruments, advanced order types, and cross-chain communication. Read more about Layer 2 solutions here.
The delegated Proof-of-Stake (dPOS) system built into Tendermint Core is utilized as Switcheo TradeHub's underlying consensus mechanism. This means the network is secured by a decentralized network of validator nodes that verify each transaction on the blockchain.
Switcheo TradeHub is built specifically for trading and does not have generic smart contract execution features. This means the entire blockchain is highly-optimized for trading-related execution paths while minimizing the number of possible attack vectors on the blockchain.
The protocol has low block times (1s) for fast confirmations. As nodes use Tendermint BFT as the consensus protocol, transactions no longer need to be confirmed on multiple blockchains in order to be fully executed.
The protocol has also been tested to sustain a very high transaction throughput of more than 5000 transactions per second (TPS) and can absorb a peak load exceeding 10,000 TPS.
By offloading transactions (such as trade requests) from Layer 1 chains onto Switcheo TradeHub, users can bear significantly lower costs as compared to trading directly on Layer 1 chains.
Trades from Layer 1 chains are compressed through “rollups”, which allows for the settlement of trades to be scalable and inexpensive. With this architecture, users will be able to enjoy trades with low or even zero network fees. Only deposit and withdrawal transactions incur gas fees on the Layer 1 chains, while all other transactions are sent to the Layer 2 protocol, and are accepted by Switcheo TradeHub nodes.
Network fees on the trading protocol are fixed per transaction. This means there are no gas bidding wars, no submitting transactions hoping they will be mined, no front-running, and reduced Miner Extractable Value.
Since Switcheo's inception, our core ethos has always been achieving true decentralization. Through governance, the entire Switcheo TradeHub protocol can be driven and run by the community. More information can be found in the On-Chain Governance category.
Switcheo TradeHub enables cross-chain communication by acting as a bridge to sovereign blockchains, making use of a "Polychain" to relay cross-chain transactions such as deposits and withdrawals between chains. This separate relay chain maintains block headers of participating chains which enables cross-chain communication.
“Depositing” an asset native from another blockchain to Switcheo Tradehub involves locking the funds on another chain and minting an equivalent token on Switcheo TradeHub
Conversely, “Withdrawing” an asset from Switcheo Tradehub involves burning the minted tokens and unlocking the funds on the other chain
As initial collaborators of Poly Network, Switcheo TradeHub is able to integrate with blockchains that are part of the heterogenous interoperability protocol:
Binance Smart Chain ✅
Zilliqa (coming soon)
Huobi Eco Chain (HECO) (coming soon)
Read Poly Network's whitepaper here.
Cosmos IBC (coming soon)
Being built on Cosmos, Switcheo TradeHub will be able to interoperate with participating Inter-blockchain Communication Protocol (IBC) protocols upon completion of the Stargate upgrade.