Drift Protocol is launching the most anticipated feature since our mainnet launch — limit orders!
Limit orders on Drift are powered by a hybrid decentralised orderbook (DLOB) model that settles trades against our DAMM.
Drift’s focus is building a feature-complete decentralised DEX, that uses crypto-native infrastructure built from the ground-up with blockchain-first principles in mind.
Drift’s growth so far in the past two months since launch was driven entirely by its DAMM system which offered market orders only. Traders loved the DAMM due to its instant liquidity that was always available with slippage that was comparable to other exchanges.
In order to build limit orders that conserved the liquidity properties of the DAMM, we had to design a system that was computationally efficient and was compatible with our novel DAMM. The former was particularly pertinent as:
- in an on-chain environment, there is a trade-off for high computational requirements. This trade off is typically speed and reliability; and
- traditionally, placing all orders and order matching algorithms fully on-chain leads to inefficiency.
Our vision was to design a limit order system that was crypto-native, scalable and married the best of the DAMM’s guaranteed liquidity and adaptable slippage with the flexibility of limit orders.
As a result, we came up with the Decentralised Limit Orderbook (DLOB).
Drift’s Hybrid Decentralised Limit Orderbook (DLOB)
What is a DLOB?
Drift’s Decentralised Limit Order Book (“DLOB”) is a computationally efficient and decentralised system that utilises economic incentives to enable limit orders to be placed against the DAMM.
Underlying the design of the DLOB is two core values:
- decentralisation; and
- computational efficiency.
Decentralisation is achieved through our network of hybrid off-chain keeper bots (“Keepers”) that anyone can build and run — similar to liquidator bots.
Computational efficiency is achieved by leaving the order-filling logic — the part that requires the most computational power — off-chain, and filling them on-chain upon a trigger.
Hence, Drift’s unique limit order system is a hybrid system that uses a combination off-chain Keepers and on-chain settlement.
Our thesis behind this design is that a DLOB will remain efficient across various types of network conditions. Whether or not this will be the case, is yet to be tested.