Switcheo TradeHub comes with a highly scalable, open-source dPOS order matching engine that is advanced enough to support sophisticated markets and advanced financial instruments.
Each validator node hosts a copy of the order matching engine, acting as witnesses to ensure all other nodes also process trade transactions correctly, thereby securing the network. Using a batch-based matching system across all markets, Switcheo TradeHub is able to perform low latency on-chain order matching that fully eliminates front-running.
After validation and execution of trades on Switcheo TradeHub, transactions will be broadcast in batches to be settled on Layer 1 blockchains such as Bitcoin, Ethereum and Neo.
Comparison with Centralized Exchanges (CEXs)
Switcheo TradeHub's order matching engine is far more advanced and comparable with other CEXs such as BitMEX and Deribit.
CEXes utilize a Continuous Double Auction (CDA) model which processes orders as soon as they reach the exchange. The order is immediately filled by an opposing order, or it rests on the orderbook until a matching order is found.
The CDA model disadvantages Market Makers, and cannot scale to handle high throughput during periods of high trading volume.
Switcheo TradeHub utilizes the Frequent Batch Auction (FBA) model where orders are crossed within a single discrete time period (in this case, Switcheo TradeHub’s block time).
In the FBA model, if bid and ask quantity differs at the clearing/cross price, the smaller quantity side is filled fully, while the higher quantity side has its orders filled evenly and partially.
The FBA model eliminates the possibility of front running and negative spreads, hence increasing liquidity