AMM & Order Book πŸš€
To ensure perfect experience of decentralized derivatives trading, RiskSwap offers a hybrid model of AMM and Central Limit Order Book.
Quick summary: RiskSwap utilizes AMM for creating pools, from which the liquidity goes to the Order Book for further execution of trades with its inherent security, speed, and reliable price discovery algorithms.
Unlike a wide variety of choices that are currently available in DeFi in terms of financial derivatives, RiskSwap employs the Order Book trade execution model just as opposed to AMM as a complementary liquidity pool facilitator. We combine the best of two worlds: decentralization on the one hand, and established liquidity that permits an instantaneous execution of a trade on the other. For derivatives markets that never give traders access to illiquid assets, this solution is a perfect combo of security and speed.
At the same time, RiskSwap will run on Solana, famous for its scalability and speed. Thus, the situation when traders suffer from low blockchain throughout is not a case for RiskSwap. RiskSwap’s model of implementation of on-chain Central Limit Order Book delegates the right to users to submit orders with constituents such as the size of a trade, price ranging, and the directional future of a derivative of the underlying crypto asset.
Additionally, because of the almost instantaneous execution and validation of a transaction, the risk of being exploited is close to zero. On top of that the Order Book model also precludes frontrunning and sandwiching attacks as the β€œask” and β€œbid” will follow a deterministic model of generating orders.
Although Order Books are widely associated with centralization and governance, we introduce a non-custodial base for ordering. Unsupervised and invulnerable to tampering deterministic algorithms allow for eliminating pitfalls in trading and help enable fully automatic intermediary matching orders algorithms between users.

How does it work?

Users trade on the exchange through an order book, and each of them has the following parameters:
    margin account
    open positions
    uPNL
    collateral
    funding.
Users can invest their USDC in AMM, which will act as a market maker on the exchange, and use the funds as collateral. By means of algorithms, AMM places orders for buy and sell, changes the spread, liquidity in orders in such a way that net delta tends to 0.
Usually, specialized funds are engaged in market-making on exchanges and take all the profits for themselves. Though on RiskSwap, users without restrictions on the amount of capital will be able to receive part of the income from market-making.
To sum it up, the workflow looks as follows:
    1.
    User deposits USDC into the vault
    2.
    An automated market maker (AMM) places orders (bid and ask) in the order book according to certain mathematical algorithms of the RiskSwap Engine, with a desire to maximize the number of transactions while minimizing the inventory risk and OI (Open interest) of the market maker.
    3.
    Users investing USDC in AMM make a profit due to the spread between buying and selling and an incentive in the form of RISK tokens in direct proportion to their investments.
Last modified 24d ago
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