3.2 Order book model — decentralized governance

On-chain order book

Even in some DEXs, everything is done on-chain (we'll discuss hybrid approaches shortly). Every order (and its changes and revocations) is written to the blockchain. This is obviously a very transparent way, because you don't need to trust a third party to pass the order to you, and there is no possibility of order confusion.

Unfortunately, this is also the least practical approach. Because you must require each node on the network to record order information at any time, you will pay for it in the end. You need to wait until miners add your information to the blockchain, which means the process you experience is tedious.

Off-chain order book

DEXs that incorporate an on-chain order book model still retain their decentralized nature in some ways, but they are undeniably more centralized than previous entries. All orders are no longer posted on the blockchain, but are hosted somewhere.

Where exactly? It depends on the situation. You can delegate the overall management of the order book to a centralized entity. But if this is a malicious entity, they can manipulate the market to some extent (i.e. by front-running or tampering with orders, etc.). However, unmanaged storage is not without its benefits.

The 0x protocol for ERC-20 and other tokens deployed on the Ethereum blockchain is a good example. This is not a single DEX, it provides a framework for “relayers” to manage off-chain order books. With 0x smart contracts and other tools, hosts have access to combined liquidity pools and can relay orders between users. Only when the parties are successfully matched, the transaction will start executing on-chain.

From a usability standpoint, these methods outperform those that rely on an on-chain order book. They don't suffer from the same limitations in terms of speed as they are less reliant on the blockchain. Transactions must be settled on the blockchain, so off-chain order book models are still not as fast as centralized exchanges.

In DeFi

AMM(automated market maker) occupies most of the DEX liquidity due to the performance limitations inherent in Ethereum, making the order book and market makers on the chain infeasible. With AMM increasingly saturated and professional market manufacturers seeking more effective solutions to provide DeFi liquidity, MetaFX has begun to try to extract the advantages of the 0X protocol, realize transactions on the chain directly for token price quotes for the blockchain itself, order matching and transaction settlement, and execute orders and matches in out-of-chain systems.That is, "under chain trading, on chain settlement"

Furthermore, to address that the matching of smart contracts when trading across the chain bridge does not affect the transaction network, MetaFX also deploys protocol updates through a combination of abstract and decentralized governance, as shown in Fig:

In this way, deploying smart contracts that conduct multi-to-many asset transactions will not disrupt the transaction network on the chain