Ask or search…
Comment on page

Part III.

A Fully Decentralized, Trustless System

In the third part of our discussion on SYMMIO, we dive deeper into its unique, decentralized nature. SYMMIO distinguishes itself from other platforms by its trustless structure, where trades are carried out in a genuinely decentralized environment rather than relying on one central exchange.

Decentralized Trading System

SYMMIO is fundamentally designed around a decentralized approach, which makes the entire system trustless. While there could be a single counterparty offering all trades and hedging itself, it would result in a fully centralized system, similar to what you'd find in a typical cryptocurrency exchange such as Binance. In such a setup, the central exchange holds control and can dictate the conditions of the trade, which introduces the risk of manipulation and trust issues.
By contrast, SYMMIO decentralizes trading by facilitating high-throughput Automated Markets for Quotation (AMFQ) based OTC systems. An AMFQ system allows users to request quotes for a specific quantity of security, and the system responds with a price that can be executed immediately. It's a more suitable model for blockchain because it reduces the complexity of creating a fully decentralized order book on-chain.

On-chain Order Books: A Different Perspective

Traditional crypto trading platforms rely on order books to facilitate trading. However, creating a high-throughput order book on-chain in the blockchain environment is nearly impossible due to technical constraints and the potential for front-running (an unethical practice of executing orders on security before officially announced trades).
The current crypto trading landscape is still in its nascent stage compared to traditional finance. Centralized order books are more suited for these conventional financial systems, where latency (delay in data transmission) can be minimized. The fight for the least latency is ongoing, and in a decentralized setup like blockchain, the fair ordering of blocks to prevent front-running is a significant challenge.
Several protocols, like DYDX, try to address this by implementing models where all validators are KYC'd (Know Your Customer) and selected to prevent front-running. However, such an approach still implies trust in the system for selecting a fair validator set.
SYMMIO takes a different approach, rejecting the concept of on-chain order books and developing an innovative OTC AMFQ system instead. This not only prevents front-running but also takes full advantage of the decentralized nature of blockchain.

Collateral and Risk Management

In SYMMIO's trustless system, counterparties lock collateral on-chain, meaning you never rely on your counterparty's actions. If the price moves, depending on the leverage, your counterparty could be liquidated. The system also has a built-in mechanism to disincentivize liquidations.
Moreover, an instant auction is possible if a counterparty gets liquidated, meaning another party can purchase your position at a discounted price. The liquidated counterparty also provides a Credit Value Adjustment (CVA), a risk premium, which goes to the other party as compensation for the risk taken.

Bridging the Gap Between Centralized and Decentralized Trading

SYMMIO essentially mirrors the risk on-chain, creating a unique hybrid model that balances the strengths of both centralized and decentralized systems. It serves as a marketplace facilitating third parties, known as hedgers, to execute orders. These hedgers can essentially be anyone, opening up a plethora of possibilities. They can operate on any exchange, be it Binance, Bybit, KuCoin, Bitfinex, or even run their own market-making or product structuring operations.
In conclusion, SYMMIO offers a promising solution to the drawbacks of current crypto trading systems.
Last modified 4mo ago
All rights to the people (c) 2023 Symmetry Labs A.G.