trading

0x and StarkWare have teamed up to scale DEX trades by 20x

Quick Take

  • 0x and StarkWare have teamed up on a new system to scale DEX trades by 20x
  • The so-called StarkDEX aims to alleviate performance-related issues on DEXes

Decentralized exchanges could see a bump in the number of transactions they’re able to process thanks to a new partnership inked between 0x and StarkWare.

The teams announced the alpha release of a new proof system – dubbed StarkDEX – to the Ethereum blockchain, which aims to alleviate problems facing decentralized exchanges.

At present, Ethereum can verify about three exchange-related transactions per second. StarkDEX purports to scale up decentralized exchange performance to 8,000 transactions per block at maximum throughput, with 40-60 transactions/second likely for the alpha version. 

Centralized exchanges appeal to traders for their speed and liquidity, but have been subject to numerous hacks. Decentralized exchanges eliminate counterparty risk due to their non-custodial nature, but with settlement taking place on-chain, speed and liquidity often suffer. That has kept big-pocket traders away from such venues, resulting in paltry amounts of liquidity. Radar Relay, a popular 0x-based exchanges, saw just over $88,000 worth of cryptocurrency trade hands in the last 24 hours.

How it works

STARKs – short for Scalable Transparent ARgument of Knowledge – could ameliorate some of these performance-related problems in Ethereum trading by grouping transactions together in batches, sending the 0x orders to the StarkWare-run prover service, as opposed to processing them one at a time. After checking signatures and validity of each transaction, the data is stored off-chain and the prover creates only one proof, basically one transaction, for the entire batch, which is then verified by the on-chain contract. Finally, the verifier contract connects to the 0x smart contract pipeline that moves the batch to be confirmed on the Ethereum blockchain.

Source: starkdex.io

By grouping the transactions together off-chain and verifying them as one entity on-chain, process is expedited and facilitates more Ethereum transactions per second than before. It also significantly lowers the amount of gas per DEX transaction, with the alpha performing at just over 6,000 gas per trade. Batching transactions spreads the cost out, amortizing them across the transactions in the batch.

Source: starkdex.io

This technology and process is the first of its kind, according to 0x. For now, due to the expertise required, StarkWare is managing the proving infrastructure themselves, but over time the batching process could become commoditized. 0x’s Marketing Lead, Matt Taylor, believes that, eventually, all decentralized exchanges will adopt a similar hybrid on-chain/off-chain structure.  

The alpha Proof of Concept, which uses a sampling of live Binance transactions, is intended to demonstrate the power of STARKs as a viable Layer-2 scaling solution, with 0x relayer integration still some time away. Taylor suggests that, post integration, relayers will ultimately take fees to offset the computation costs associated with the proof-generation service. The release data for Mainnet launch is yet to be announced.  

There’s still the liquidity problem

While increasing throughput by several orders of magnitude, StarkDEX is not the panacea for DEX liquidity that many are hoping for. Scalability is important but just a piece of the puzzle when it comes to the liquidity bottleneck.

On that front, 0x is working closely with professional market makers to address the intricacies of trading on decentralized venues versus centralized exchanges, with the former requiring intimate understanding of novel concepts including self-custody and monitoring transaction pools. 

The 0x Coordinator Contract will alleviate existing issues around front-running, order collision, and expensive order cancellations.