Dual Flow Batch Auction (DFBA) is a new trading mechanism designed to address the limitations of continuous limit order books (CLOB) on the blockchain.

DFBA operates with two auctions every 100 milliseconds, eliminating time priority and focusing competition on price and size, helping to address latency arbitrage and MEV, while improving liquidity and reducing transaction costs.

MAIN CONTENT

  • DFBA replaces the continuous order book mechanism, addressing latency arbitrage and MEV issues.

  • It organizes two auctions every 100 milliseconds, dividing orders into Makers and Takers.

  • Helps increase liquidity, reduce transaction costs, and create a fair and efficient trading environment.

What is DFBA and how does it operate?

DFBA is a new trading mechanism proposed by the Jump Crypto research team, operating by organizing two independent auctions every 100 milliseconds, aiming to improve the limitations of continuous limit order books (CLOB) on the blockchain.

In this mechanism, orders are divided into two groups: Makers (liquidity providers) and Takers (market price buyers/sellers), all transactions are executed at a single fair payment price. This removes time priority for orders, reduces speed fee competition, and shifts the focus to price and transaction size.

Why does DFBA address the issues of traditional CLOB?

CLOB operates based on a continuous order matching mechanism with time priority, which can easily lead to latency arbitrage and MEV – exploiting transaction delays for profit, increasing costs, and reducing transparency.

DFBA by organizing batch auctions with a fixed time interval, eliminating time priority, preventing latency exploitation. This mechanism helps create a deeper market, tighter quotes, and protects natural traders from unhealthy speed competition.

"Shifting the competitive focus from speed to price and size will create a more transparent and fair trading environment, addressing many long-standing issues in the cryptocurrency market."
– Jump Crypto research team, article published in August 2023

What are the outstanding advantages of DFBA compared to other trading models?

DFBA inherits and combines the advantages of previous trading models such as continuous liquidity and fairness created by auctions. At the same time, it avoids drawbacks such as high price reductions and liquidity fragmentation commonly seen in current models.

As a result, this mechanism provides a more efficient trading environment, with tighter quotes and facilitates market makers and natural traders to operate smoothly, minimizing unnecessary risks and costs.

How does DFBA impact liquidity and transaction costs in the market?

By organizing order matching in batches and common payment prices, DFBA helps connect buy and sell orders more deeply, thus increasing overall liquidity. This also tightens the bid-ask spread, reducing transaction costs for participants.

In addition, eliminating time priority reduces the exploitation of latency and MEV, keeping the market more stable and enhancing the trading experience for investors.

Frequently asked questions about DFBA

How does DFBA operate in each auction session?

Every 100 milliseconds, DFBA organizes two independent auctions, classifying orders into Makers and Takers, operating on the basis of a single fair payment price between parties.

How does DFBA help reduce MEV issues?

By eliminating time priority and organizing batch auctions, DFBA prevents the ability to reorder orders or exploit latency for profit, effectively minimizing MEV.

Is DFBA applicable to all types of cryptocurrency exchanges?

This mechanism is designed to improve exchanges using continuous order books, especially on blockchain, but requires compatible technical support for implementation.

Does DFBA affect order matching speed?

DFBA still ensures continuous liquidity within 100 milliseconds, users do not experience significant delays but benefit from fairness and reduced transaction costs.

Who benefits the most from DFBA?

Market makers, natural traders, and even small investors all benefit from the transparent trading environment, reduced costs, and risks that DFBA provides.

Source: https://tintucbitcoin.com/jump-crypto-de-xuat-co-che-dfba-blockchain/

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