💡Features
Off-Chain Order Book Management
A key limitation of fully on-chain order books is the latency and gas cost associated with every order operation. Fermi DEX addresses this by maintaining the order book entirely off-chain. The off-chain matching engine processes all order actions - including placements, modifications, and cancellations - in real time, typically within tens of milliseconds. This design yields several important advantages:
Ultra-Low Latency: Orders are acknowledged and matched in sub-50 ms, rivaling the speed of high-performance centralized exchanges.
Gasless Order Management: Since order updates occur off-chain, users incur no gas fees for posting or modifying orders.
High Throughput: The off-chain system can process tens of thousands of operations per second, far exceeding the throughput limits imposed by on-chain execution. The most common orderbook operations, i.e. order placement and cancellation, are offloaded to offchain sequencers.
Liquidity Vaults and Capital Reuse
Fermi DEX takes a unique approach to capital efficiency. Traditional order book models require that liquidity providers lock up capital for each order, thereby limiting their ability to deploy the same funds across multiple opportunities. Fermi DEX introduces liquidity vaults, which are dedicated on-chain accounts that represent a user's available capital. Key features include:
Deferred Collateralization: Funds are not locked at the time of order placement; rather, market makers pre-authorize the smart contract to transfer funds if and when an order is executed.
Cross-Market Capital Sharing: The same pool of funds can back orders across multiple trading pairs, significantly increasing effective liquidity.
Yield-Enhanced Liquidity: Users can keep their assets deployed in external yield-generating protocols (e.g., lending pools or yield vaults) while still offering them as collateral for orders. At the moment of settlement, the necessary funds are drawn from these sources.
This model of liquidity reuse not only improves capital efficiency but also reduces the opportunity cost for market makers, allowing them to earn additional yield on idle funds.
Gasless Trading and Cost of Capital
In classical models of limit order markets, the presence of fees or transaction costs acts like a tax on liquidity provision — only if the expected spread revenue exceeds these costs will orders be placed. By removing per-trade gas fees, Fermi effectively lowers the cost of supplying liquidity to near zero. This has two effects:
Even very small spread strategies become viable, as market makers do not need to recover gas expenditures. One can analogize this to a model where the spread ss is set such that
$s≥2⋅(cost per trade)
so that if the cost →0→0, the equilibrium spread can approach the theoretical minimum imposed by risk and informational factors.
Higher-order optimal execution becomes feasible: traders can slice orders or update orders frequently without penalty. The lack of gas cost encourages more nuanced order placement — for example, a large trader might split a 1000-token sell into ten 100-token layered limit orders at different prices and dynamically cancel/replace them as needed, something impractical on-chain due to gas costs but straightforward on Fermi.
Reduced latency and fair ordering guarantees reduce pick off risk - a key challenge for MMs is that their stale orders may get picked off, before their order cancellation is processed (due to congestion, priority fee spikes, etc.) - this risk forces them to quote wider spreads to allow for greater margin for error. Prices can move significantly, even in a 1-5 second timespan - so a much smaller "tick" time period/resolution is needed to enable MMs to act with precision based on the current market price.
This leads to more order flow and a richer order book. From a capital cost perspective, Fermi's liquidity reuse also reduces the opportunity cost of capital. In traditional finance, holding inventory (capital tied in orders) incurs a cost (since it could be earning elsewhere, plus the risk exposure). Fermi mitigates this by allowing that capital to earn elsewhere until needed, effectively lowering the cost of carrying inventory for market makers.
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