DeGate
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DeGate

DeGate Roadmap Update:

Orderbook Liquidity and Layer 3 scaling

Since the establishment of the project, DeGate has been committed to building a decentralized exchange protocol with excellent user experience, permissionless and trustless, based on the Ethereum Layer 2 infrastructure. All this is in an effort to make decentralized exchange mainstream. In this article, we will describe the latest development roadmap and thinking of DeGate determined by our in-depth research on the industry and technology. But first, a look at the exciting developments in the Ethereum Layer 2 ecosystem this summer that have formed the basis for our product innovation.

The Layer 2 Summer

As the official kick-off of general-purpose Ethereum Layer 2 protocols is getting closer, excitement is building about their implementation and potential impact. Among these projects, the EVM-compatible Ethereum Layer 2 solutions are likely to bring about an explosion of Ethereum applications on Layer 2 and the migration of assets. Representative projects include Arbitrum, Optimism, zkSync, and Hermez etc.

Among them, Arbitrum Rollup launched the Arbitrum One mainnet to developers for testing in June 2021, and more than 300 whitelisted projects have started to deploy applications on Arbitrum’s mainnet, including many of the leading projects on Ethereum, such as Uniswap.

DeGate has also deployed the Bridge module on the Arbitrum mainnet. Most of the popular common infrastructure projects for Ethereum developers have also completed support for Arbitrum, including Truffle, Infura, Alchemy, Etherscan, the Graph, etc. Developers can seamlessly migrate their applications from Ethereum Layer 1 to Layer 2, making development much more convenient. We are looking forward to the public test network for users.

Unlike Arbitrum, Optimism launched a soft version that is only open to a limited whitelist of developers. Synthetix was the first partner to deploy on it and has continued to enable more and more features on Optimism. On July 30, 2021, Synthetix officially launched its synthetic asset trading on Optimism, and Uniswap V3 also launched the Optimism version in mid-July, which users can already experience. We hope Optimism will be open to more developers for deployment soon, and while its mainnet was delayed from the official launch date in July, we feel it is very close to the official launch.

Let’s learn more about the progress of zkSync, the ace project of another track — zero-knowledge rollups. Unlike Optimistic Rollups, zk Rollups have a clear advantage in the efficiency of Layer 2 to Layer 1 asset migration without passing fraud proofs, with no exit period because of the technical features of zk rollups. However, it is difficult to implement EVM on a zero-knowledge proof circuit, resulting in y existing Layer 1 projects being unable to perform a simple migration. A testnet of zkEVM was released by Matter Labs at the end of May to address this issue. This is a very meaningful exploration and achievement in blockchain engineering, and we are looking forward to it.

We have observed that the Ethereum Foundation and Hermez team are putting a lot of efforts into research and development on zkEVM. It is a significant achievement to implement a full opcode Ethereum virtual machine with zk technology, and the top-tier teams in the industry are working towards this direction.

Building around the Orderbook model

In the initial roadmap of DeGate, we mentioned the concept of a one-stop trading platform: the core modules are Automated Market maker (AMM) and Orderbook, which are in great demand in the market by different users.

Why do users favor the AMM model? First, it is very simple to use. There is good liquidity and experience in exchanging majority tokens. Second, the mechanism of the liquidity pool activates sleeping assets in wallets. It enables ordinary people to participate in market-making, which only professional users could do before. 3. Minority assets can also obtain basic liquidity with a lower threshold on the skill of the market-maker.

However, despite the popularity of the AMM, the user demand for the Orderbook is stronger. Orderbook and quote transactions are the most widespread forms of trading in traditional finance, and the demand for limit orders in the field of crypto assets is extremely obvious, as evidenced in the field of centralized exchanges. Due to the immaturity of blockchain infrastructure, the costs and user experience have not been comparable to the experience of centralized products, and as a result, the main liquidity of crypto is still concentrated in centralized exchanges.

Obviously, both AMM and Orderbook have broad user demand, and they are highly complementary in certain specific scenarios. If liquidity can be aggregated into the same single protocol, the overall liquidity and trading efficiency of the protocol will be greatly improved. Through research, we have found a very novel way to integrate the previously independently deployed AMM module into the orderbook. The product will provide a simple automated market maker feature for non-professional users, which will, in turn, provide liquidity for orderbook trades The technical details will be introduced to the community in the subsequent article.

Building trust-less Layer 3 on general-purpose Layer 2

Besides the focus on orderbook trading, we have, with deep research and data analysis, come to another important conclusion. Although the Layer 2 infrastructure greatly improves the throughput of Ethereum, it is necessary to ensure that the data availability of Layer 2 inherits the security properties of Layer 1. The transaction data of Layer 2 still needs to be compressed and posted to Layer 1 and the costs are not negligible.- They will be around 1/10 to 1/100 of the cost of transacting on Layer 1.

DeGate wants to build a decentralized exchange protocol that is focused on mainstream users. DeGate provides high throughput in terms of user experience and will charge zero gas and transaction fees for maker’s orders so that high-frequency trading is supported.

To achieve this goal, DeGate will implement a Layer 3 consensus network based on zero-knowledge proof to implement exchange features based on the existing general-purpose Ethereum Layer 2. The DeGate Layer 3 network can accept user orders for efficient matching, and submit the matching results to Layer 2 through zk-proof mechanism. Data is verified and stored through smart contracts to ensure that the system has the same security as Ethereum Layer 1.

In the future, Layer 3 will transition from a single-node model to a multi-node model, where anyone can participate in the consensus mechanism and process transactions. Layer 3 will evolve with a high consensus security public chain standard, making the protocol robust and decentralized.

The design principles of DeGate

As we thought hard about the roots and core values of this project in product discussions, we also sharpened the design principles of the DeGate product. That is, the protocol layer is to be completely open, permissionless, and trustless.

The ultimate goal of DeGate is that its final architecture enables us to eventually have the capability to build a fully open client that anyone can compile by themselves from source code. This client does not rely on the centralized infrastructure, it is similar to Bitcoin’s full-node client. Users can execute trading by connecting any node to the client.

To achieve the goal of being permissionless, DeGate protocol will support any token to launch trading pairs by themselves. We will eventually be able to provide any third party with the ability to build DeGate infrastructure, such as front-ends, consensus nodes, and matching engines, etc.

To enable the feature of being trustless, DeGate will have no administrative authority to misappropriate users’ assets from the first version of the initial launch. The protocol is immutable, in that code cannot be upgraded in any way. Users will have the highest authority over their assets, and users will still have the capability to retrieve assets from Layer 2 by invoking the Smart Contract directly even if DeGate is discontinued on Layer 3.

Some adjustments to the existing Roadmap

Based on many novel findings and in-depth research, we’d like to share some adjustments to the existing roadmap and other recent updates.

The core code of DeGate Bridge has been developed and audited by three firms. Since the validation node of the Arbitrum Layer 2 infrastructure has not been ready, the security prerequisites are not met yet for the full launch of all DeGate Bridge features. We plan to deploy a beta version of DeGate Bridge in this initial phase as we work on security. . We will control the pool asset upper limit and asset types, and will not enable users‘ liquidity for market-making mining. In this phase, all the funds will be provided by DeGate Home DAO. Arbitrum has announced plans to launch at the end of August, and we aim to complete the beta deployment within two weeks after the launch, which is expected to be in the middle of September 2021

DeGate has plans for a fiat gateway. On the technical front, we have initially completed the development of the client service of the fiat gateway. We are working with our partners to achieve compliance and deployment on Layer 2 infrastructure. As this is a work in progress, we will update on this feature in the near future.

The original plan to launch AMM and Orderbook modules separately has been changed to launch them in the same single protocol version. DeGate will no longer have a separate AMM module. From the end user's perspective, the product experience will be based on the order book. We plan to provide automated market maker features within a short period of time after the order book launch. Because of the complexity and innovative nature of this project, we hope to deploy the beta version of MVP in the next few months and aim to complete the official deployment in Q1 2022.

At the same time, we are beginning to invest more of our resources in working with our partners and industry pioneers to advance the development of zero-knowledge proof technology, computing efficiency, and dedicated hardware.

We have come a long way in a short time, and there is plenty more to do on the road ahead. We’d like to say a big thank you to the community for your continued support of the DeGate project. Let’s keep working together to make our innovations a reality.

More about DeGate:

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DeGate Team

DeGate Team

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A DAO-centric, decentralised limit trading protocol built on Ethereum. 🚀