Intro

Introduction

The A-DEX is a peer-to-peer system designed for exchanging cryptocurrencies on the Antelope(EOSIO) blockchains.

How does the A-DEX protocol compare to a typical market?

To understand how the A-DEX protocol differs from a traditional exchange, it is helpful to first look at two subjects: how the Automated Market Maker design deviates from traditional central limit order book-based exchanges, and how permissionless systems depart from conventional permissioned systems.

Order Book VS AMM

Most publicly accessible markets use a central limit order book style of exchange, where buyers and sellers create orders organized by price level that are progressively filled as demand shifts. Anyone who has traded stocks through brokerage firms will be familiar with an order book system.

The A-DEX protocol takes a different approach, using an Automated Market Maker (AMM), sometimes referred to as a Constant Function Market Maker, in place of an order book.

At a very high level, an AMM replaces the buy and sell orders in an order book market with a liquidity pool of two assets, both valued relative to each other. As one asset is traded for the other, the relative prices of the two assets shift, and a new market rate for both is determined. In this dynamic, a buyer or seller trades directly with the pool, rather than with specific orders left by other parties. The advantages and disadvantages of Automated Market Makers versus their traditional order book counterparts are under active research by a growing number of parties.

Permissionless Systems

The second departure from traditional markets is the permissionless and immutable design of the A-DEX protocol. These design decisions were inspired by EOSIO's core tenets and our commitment to the ideals of permissionless access and immutability as indispensable components of a future in which anyone in the world can access financial services without fear of discrimination or counter-party risk.

Permissionless design means that the protocol's services are entirely open for public use, with no ability to selectively restrict who can or cannot use them. Anyone can swap, provide liquidity. This is a departure from traditional financial services, which typically restrict access based on geography, wealth status, and age.

The protocol is also preparing to be immutable, in other words not upgradeable. No party is able to pause the contracts, reverse trade execution, or otherwise change the behavior of the protocol in any way. It is worth noting that A-DEX Governance has the right (but no obligation) to divert a percentage of swap fees on any pool to a specified address. However, this capability is known to all participants in advance, and to prevent abuse, the percentage is constrained to 0.05%.