⚔️Vertex Edge
Mapping out the synchronous orderbook liquidity of Vertex Edge.
Last updated
Mapping out the synchronous orderbook liquidity of Vertex Edge.
Last updated
Vertex Edge is a novel synchronous orderbook liquidity product for unifying cross-chain liquidity across different chains.
Edge unleashes the full potential of Vertex’s performant trading engine, unlocking a multi-chain future where liquidity among chains is no longer fragmented. Instead, liquidity from supported Edge chains is fused together, aggregated at the Vertex sequencer level and settled locally on-chain to the origin base layer of a cross-chain Vertex instance.
Edge is primarily a major upgrade to the Vertex sequencer — a custom parallel EVM implementation of an off-chain orderbook and trading engine built in Rust.
Edge amplifies the sequencer’s scope of capabilities, extending them cross-chain to any supported base layer ecosystem.
Conceptually, Edge functions like a virtual market maker between exchange venues on different chains.
The state of the sequencer is split (e.g., sharded) between supported chains concurrently, intaking and cloning inbound orders from each chain. Independent orders from one chain are then matched against liquidity from multiple chains.
Both sides of the trade are filled out, and the sequencer (Edge) takes the opposite side of the inbound trades — automatically hedging and rebalancing liquidity on the back-end between chains.
Notably, the sequencer only mirrors resting liquidity (e.g., maker orders) across the sharded states of the Vertex Edge instances on different base layers. Taker orders remain unchanged, and are submitted directly from an independent Vertex Edge instance, such as the Blitz DEX, to the sequencer’s unified liquidity layer — Edge.
Order matching between chains occurs concurrently, with the state of the sequencer’s consolidated liquidity profile across all of the supported base layers sharded and propagated to each cross-chain Vertex instance.
As a result, Edge is capable of matching inbound orders from one chain with the combined orderbook liquidity of all of the base layers plugged into the Vertex sequencer.
Edge forges the path for the sequencer to run on multiple (non-Arbitrum) chains simultaneously without fragmenting liquidity between the chains.
You can think of each inbound order from a Vertex instance as a request to modify a balance on-chain. As a result, settlements are just rendered on the specific chains (e.g., Vertex on Arbitrum) where the corresponding balances need to be altered.
Intuitive Example: You can consider Vertex Edge as a network of highways connecting isolated liquidity islands.
This superhighway of liquidity among the islands doesn’t just connect these islands; it merges them into a continent of shared liquidity.
Orders from different blockchains are matched with unprecedented efficiency, thanks to this interconnected liquidity web.
Synchronization of liquidity across multiple chains removes the barriers that cause bottlenecks and fragmented liquidity pools. By weaving together the liquidity profile from multiple chains, Edge provides a means to trade against unified cross-chain liquidity on a single DEX interface without requiring a user to move from Chain A to Chain B.
Traditional cross-chain solutions often divide and dilute liquidity across platforms.
Vertex Edge represents a significant departure from this legacy, unifying liquidity across chains, rather than splintering it into isolated hubs.
As Vertex instances proliferate across ecosystems and usage grows, a mutually beneficial scaling of liquidity manifests. For example, usage of a new Vertex instance on a non-Arbitrum chain invokes positive order flow and improves liquidity effects for Vertex on Arbitrum.
Orderbook liquidity on the non-Arbitrum instance, such as Blitz, is injected into a synchronous orderbook, fusing the liquidity together from both Vertex on Arbitrum and Blitz on Blast.
The aggregated liquidity via Edge is accessible by any user of a cross-chain Vertex instance (e.g., Blitz), displayed as a single, synchronous orderbook on the Blitz app’s interface.
Settlement of matched orders still occurs locally on-chain to the origin chain of the user — providing a net-positive impact on the local chain’s blockspace demand.
For example:
Assume there are two Vertex instances (Arbitrum & Blast).
Alice submits a market order (taker) on Blitz, to long the ETH-PERP at price X.
The sequencer (Edge) matches the order against the best liquidity after examining the orders aggregated across the two Vertex instances on Arbitrum and Blast.
The best offer is from John who is trading on Arbitrum.
John is now short on Arbitrum.
Alice is long on Blast.
In the middle, the sequencer (Edge) takes equal opposing positions on each chain. Edge is now short on Blast and long on Arbitrum.
Edge injects Alice’s matched order into the sequencer queue of batched orders to render and settle on-chain to Blast — simultaneously sending John’s order to be settled on Arbitrum.
Over time, Edge will continually build long and short positions on local chains.
Periodically, liquidity between chains will be aggregated and settlement will be made on the back-end.
The sequence of steps in the example above execute with the characteristic low-latency performance of Vertex. As such, scaling to multiple chains produces a negligible impact on Edge’s performance, which remains capable of matching inbound orders within 5–15 milliseconds — then settling matched orders in batches on-chain.
In summary, Edge is an upgraded version of the Vertex sequencer, a powerful matching engine coupled with on-chain settlement. Edge simply moves settlement from one chain to many chains.
The outcome is that liquidity fragmentation across chains is supplanted by additive, positive sum orderbook liquidity on a single layer spanning multiple chains.
It’s a superhighway of liquidity between base layer networks. Connect the chains, unify the liquidity — welcome to Vertex Edge.
06/04/2024: Check out the recent Blockworks Research report on Vertex Edge below:
Vertex Edge is the primary cross-chain product, laying the foundation for an alliance of ecosystems injecting their liquidity into a shared, synchronous orderbook liquidity layer across chains.
The expansion of the networks plugged into Vertex Edge will continue across EVM-compatible chains. The 3 currently supported Vertex Edge instances include:
Any on-chain smart contract deployment of Vertex on an independent base layer (L1 / L2) is a Vertex Edge instance. For example, Vertex (Arbitrum) and Blitz (Blast) are the original and first instance of Vertex on different L2s, respectively.
06/11/2024:Vertex on Mantle was recently launched, marking the 3rd chain supported by Vertex Edge.
A Vertex Edge instance on any base layer contains the following primary properties:
The liquidity from the chain supported by Edge (e.g., Blitz on Blast) is aggregated and unified at the sequencer level with all of the other Vertex Edge instances (Arbitrum, Blast, Mantle) in a synchronous orderbook liquidity layer.
The app interface utilizes the same UI kit and back-end as the Vertex app on Arbitrum, but modifies design features and other user-facing elements between Vertex Edge instances on different chains.
The shared liquidity is accessible by any base layer (Arbitrum, Blast, Mantle) connected to Edge.
Each Vertex instance will display the combined orderbook liquidity of all the connected chains on the app’s trading interface (e.g., the orderbook). For example, Blitz will display the resting liquidity on the orderbook from both Arbitrum and Blitz.
In summary, increased usage of Blitz is value-additive to Vertex on Arbitrum — unified liquidity is synergistic -- not subtractive. This is a different paradigm for blockchain trading.
Blitz will also launch with all of Vertex’s characteristic features available out of the box, including:
Spot, perpetuals, and an integrated money market.
Unified cross-margin across all products.
Order-matching latency of 5–15 milliseconds.
50+ spot and perpetual pairs.
Embedded AMM.
Zero trading fees for makers across all markets.
2 bps trading fees for takers across all markets.
Scalable liquidity to multiples of TVL.
HFT-friendly API & SDK (Typescript, Python, and Rust).
Most importantly, Blitz arrives with synchronous access to unified cross-chain orderbook liquidity.
More cross-chain instances of Vertex will be supported by Edge throughout 2024...Edge is coming soon to a blockchain near you.
Vertex Edge’s ability to broaden the scope of the sequencer is unique, applying a uniform standard for multi-chain liquidity sharing across a single, synchronous orderbook.
The design produces several meaningful advantages to both users and the underlying base layer networks supported by Edge. We’ll leave those examples for a bit further below.
However, it’s important to first examine the unique features that Edge unlocks through the prism of how it impacts Blitz’s core products tied together with unified cross-margin, including:
Spot Markets
Perpetual Markets
Money Markets
Spot Trading — Cross-Chain Native Assets: Vertex Edge invokes the ability for a user to trade native spot assets between chains without the direct requirement to access the underlying base layer of a given native asset they want to trade.
For example, if Alice is using Blitz on the Blast network looking to sell XYZ coin for USDC on Arbitrum, her order is matched with the resting bid liquidity on both Blast and Vertex on Arbitrum wanting to purchase XYZ coin with USDC.
Vertex Edge serves as a conduit that closes the gap between these two goals, facilitating a transaction that feels blazing-fast and cohesive, despite happening across two separate blockchain networks.
This synchronized orderbook is a substantial advantage because it aggregates liquidity, meaning a seller on one chain has access to buyers across multiple chains, and vice versa, optimizing the market depth and potentially reducing slippage.
Intuitive Example: Imagine an airport duty-free shop serving international passengers — regardless of their flight origin or destination, all passengers can transact in a single location, leveraging the airport’s unified currency exchange system.
This enhances the shopping experience by providing a wider array of options and consistent pricing, similar to how Vertex Edge aims to provide seamless trading across different blockchain networks.
Perpetuals — Interchain Funding Rates & Basis Trading: Market efficiency is optimized as cross-chain liquidity for perpetuals brings the most capital-efficient trading opportunities to traders and risk-takers across ecosystems.
As additional native spot markets and perpetual markets are added with Vertex Edge spanning across multiple ecosystems, more opportunities for basis trading will become available.
Vertex Edge will have unified funding rates, which streamlines trading to be a much more efficient experience than the current alternative, whereby the same protocols on different chains have differing funding rates due to liquidity fragmentation.
Money Market — Multi-Chain Collateral & Unified Interest Rates: Storing collateral locally on multiple chains without the need to bridge assets enables Vertex Edge to offer more collateral options, which in turn increases liquidity and trading efficiency.
By allowing users to store collateral locally on different chains, Edge can reduce many of the prevailing cross-chain friction points for money markets, potentially increasing market participation.
For example, in DeFi platforms like MakerDAO or Compound, users can deposit various types of collateral to mint stablecoins or take out loans. If these platforms supported multi-chain collateral without the need to move assets across chains, it could streamline the user experience for borrowing / lending between chains with more options and flexibility.
More collateral types tend to result in more liquidity as users from various chains contribute to the total collateral pool, increasing efficiency by simplifying the process of collateralization and borrowing.
Applied to Vertex Edge, the synchronous orderbook layer retains Vertex’s embedded money markets, tied together with a user’s entire trading portfolio via unified cross-margin.
This is an important distinction for any Edge instance, such as Blitz, from incumbent money markets in DeFi — invoking a situation where the interest rate for a given money market pool remains consistent across Edge instances on different chains.
More specifically, Vertex Edge enables a single USDC deposit interest rate across all Vertex Edge instances, enabling capital to flow freely between ecosystems — promoting the active use of capital where it can be best put to use. This generates cheap loans for the most active traders and ensures that passive capital allocators receive optimized yields.
A consistent interest rate curve is a key catalyst that enables cross-chain spot trading. It makes it easier for traders to access assets in different ecosystems without bridging any stablecoins between chains.
Without this capability, tokens remain siloed within their native ecosystem, which is a suboptimal outcome if the goal is additive, synergistic liquidity effects across multiple chains.
Connect the chains, unify the liquidity — powered by Vertex Edge.
At its core, Vertex Edge introduces an innovative synchronous orderbook design. This design packages Vertex’s powerful DEX into a shared liquidity layer spanning multiple blockchains with features such as:
A Cross-Chain Orderbook that integrates liquidity across different blockchains, enhancing market depth and reducing slippage.
Unified Money Markets offer more consistent and reliable lending and borrowing opportunities.
Spot and Derivatives Trading with enhanced efficiency and lower latency.
Primary to Vertex Edge is the emphasis on alignment between EVM chains and the app layer which is embedded in its design.
Since trades from Vertex Edge’s cross-chain trading engine settle on-chain, all on-chain activity remains on the host chain -- such as trade settlement. Each Vertex instance displays the combined orderbook liquidity of all connected chains on the app’s trading interface (e.g., the orderbook), but activity and value accrue to the host chain, rather than an alternative settlement or execution layer -- a problem with many cross-chain solutions.
Matched orders aggregate at the Sequencer level but still settle locally on-chain to the origin chain of the user. A trade can match between a user on Blast and a user on Arbitrum, with settlement occurring on both chains simultaneously.
On-chain trading activity is never extracted from the supported base layer to be settled elsewhere, a common problem for DEXs built on app chains, or with simple on-chain deposit contracts.
Vertex Edge aligns incentives between the protocol and app layer by solving for the inherent conflict of interest between general purpose chains and DEXs built on sovereign app chains.
As Vertex co-founder, Alwin Peng, describes:
“To general purpose chains, [app chains] are small, independent countries that open up predatory trade routes that suck up capital and activity — activity on the app chain doesn’t happen on the main chain.”
This fundamental goals of a general purpose base layer include:
The growth of native apps instead of outsourcing their economy elsewhere.
Bootstrapping network effects and building a community with shared values that ossify the bedrock for anything built on top of the protocol layer.
To achieve these aims they tariff foreign apps by only incentivizing native ones, and encourage users to support the local economy.
Considering the on-chain scaling issues facing performant trading engines built on L1 / L2s, many DEXs increasingly choose to utilize the app chain model. App chains are new execution environments tailored specifically to optimize the sovereign app, where interoperability with the base layer (e.g., Arbitrum) allows for the transfer of assets between the app chain and the base layer.
However, this performance comes at a cost.
The need for a distinct execution environment means app chain DEXs are effectively bridging deposits and withdrawals in and out of the underlying base layer. Trading activity is confined to the app chain’s execution layer instead of the protocol layer (e.g., Arbitrum).
As a result, the app chain design nullifies one of the primary advantages of a native L1 / L2 DEX — on-chain settlement of trading activity. Thus, separating the success of the app from the execution layer of the L1/L2.
Both app chain and general purpose chain contend for competitive blockspace markets (e.g., fees), creating an inherent conflict of interest between the two.
Vertex Edge renders robust incentive alignment via trading activity on an innovative synchronous orderbook.
The benefits of unified cross-chain liquidity span multiple chains, aiding users while on-chain settlement spurs local blockspace demand to benefit base layers.
In effect, any Vertex Edge deployment creates what amounts to a native DEX for the host base layer, producing a similarly positive impact on blockspace demand and activity as any other dApp deployed to that chain.
Liquidity is synchronized on one orderbook spanning multiple chains, and alignment is created between the protocol and app layer by Vertex Edge.
Examining the advantages Vertex Edge provides to supported base layers requires diving a bit deeper into the topic. Primarily, base layer networks derive 3 distinct benefits from Vertex Edge instances on their chain:
Increased Blockspace Demand
Better On-Chain Liquidity
Reduced Development / Integration Costs
Vertex Edge produces net increases in blockspace demand for the underlying base layer due to the batched settlement model the Vertex sequencer deploys natively on-chain.
Similar to how Vertex’s hybrid on / off-chain settlement model currently happens on Arbitrum, Edge simply extends the design to encompass independent settlement on multiple chains rather than just a single chain.
Let’s revisit one of the original examples from the Introductory Blog to illustrate this point.
Assume there are two Vertex instances (Arbitrum & Blast).
Alice submits a market order (taker) on Blitz, to long the ETH-PERP at price X.
The sequencer (Edge) matches the order against the best liquidity after examining the orders aggregated across the two Vertex instances on Arbitrum and Blast.
The best offer is from John who is trading on Arbitrum.
John is now short on Arbitrum and Alice is long on Blast.
In the middle, the sequencer (Edge) takes equal opposing positions on each chain. Edge is now short on Blast and long on Arbitrum.
Edge injects Alice’s matched order into the sequencer queue of batched orders to render and settle on-chain to Blast — simultaneously sending John’s order to be settled on Arbitrum.
Over time, Edge will continually build long and short positions on local chains.
Periodically, liquidity between chains will be aggregated and settlement will be made on the back-end.
Notice how the settlement of both Alice’s and John’s orders, originating from 2 different chains (Arbitrum & Blast), occurs locally to each origin chain for both sides of a matched order.
Alice’s order originates from Blitz (Blast).
John’s order originates from Vertex (Arbitrum).
Vertex Edge matches the orders at the Sequencer level.
Alice’s matched order settles on-chain to Blast.
John’s matched order settles on-chain to Arbitrum.
As you can see, on-chain settlement occurs on both chains that Edge utilizes to match a given order with its combined liquidity profile. This produces positive-sum effects on the local blockspace demand for any chain supported by Vertex Edge — beyond simply unifying liquidity between the chains.
The beneficial impact of Vertex’s hybrid on / off-chain settlement model on blockspace demand is already displayed lucidly by the Vertex contract’s gas consumption on Arbitrum.
03/13/2024: For example, the Vertex contracts have consistently ranked amongst the top 5 gas-spending entities on Arbitrum in 2024.
Higher gas spending apps typically provide a net increase to blockspace demand for a given base layer because the apps pay gas fees to settle matched orders from the sequencer (off-chain) as batches of transactions on-chain.
Layer two ecosystems want the following to congregate on their chain:
TVL
User Activity
Trading Volumes
Achieving all 3 naturally correlates to better on-chain liquidity. But it’s an elusive goal, plagued by some notable problems facing a multi- chain world of DeFi.
While most cross-chain technology seeks to enhance liquidity and user access across disparate blockchain environments, often it inherently disperses TVL and user activity. Ideally, any cross-chain technology integrated with a base layer should pool or increase liquidity synergistically rather than splintering it between different chains.
Additive liquidity between chains helps to alleviate obstacles for users to fluidly move assets between different chains.
Models such as cross-chain deposits via bridging or app chain DEXs do not achieve the above goals efficiently. Instead, they create a burdensome user experience, introducing additional smart contract risks and lowering base layer blockspace demand, diluting the perceived value and utility of individual base layers.
DEXs, which often serve as hubs of liquidity on any layer one or two, should prioritize an additive liquidity model in an increasingly competitive L2 environment where EVM alignment is paramount.
Users of a given base layer receive direct cross-chain liquidity access with Vertex Edge.
Underlying base layer ecosystems retain on-chain capital since capital outflows seeking better DEX liquidity are diminished. Each chain added to the network helps achieve economies of scale. Every chain benefits from the addition of the chains that preceded it, and every existing chain on the network benefits from the activity of the new additional chain.
A healthy, virtuous cycle of growth and liquidity is created.
In an increasingly competitive L2 space, every time a new cross-chain solution or native L2 DEX arises, the cost of building both architecture and basic liquidity is prohibitively expensive.
Additionally, integrating cross-chain deposits via bridges, messaging protocols, and other bridge tooling is a resource-intensive task in both engineering and financial capital that is frequently strewn with risk.
Vertex Edge significantly reduces development costs and resources for launching DEXs on an L2.
Not only does it maintain a unique cross-chain liquidity profile via its synchronous orderbook model, Vertex’s powerful orderbook DEX already has a proven product-market fit on Arbitrum with deep liquidity on 30+ markets.
Upon deployment, every Vertex Edge instance benefits from this scale avoiding the time to develop new technology, and saving the capital needed to develop deep liquidity.
In summary, Vertex Edge aligns the success of EVM chains with the success of users. If Vertex wins, the underlying chain wins.
