Spicenet Trading Stack: Enshrined Liquidity and Market Structure
Last updated
Last updated
Spicenet's major innovation lies in enshrining and concentrating liquidity and trading primitives at the network-level, instead of the smart-contract/application-level. The current status quo of blockchains involves a network layer, consisting of validators, an execution environment, and a consensus mechanism. Built on top is the smart contract layer, hosting various types of applications built as smart contracts. These smart contracts persist state, and liquidity.
As more and more smart contracts emerge, each competes for it's own share of liquidity, eventually resulting in smart contract applications siphoning liquidity from each other. This often results in a net-negative for the network where applications and smart contracts compete with each other for the same pie of liquidity rather than growing it. We believe that current blockchains are built in the wrong fashion, and smart contracts were never meant to contain liquidity, and even state for that matter.
We believe that financial applications should be thin extensions of a base layer standard, that provides an unopinionated canvas to create fully customizable financial use-cases using standardized primitives. A standard can be understood as a set of rules, policies and building blocks adhered to by all of the extensions and use-cases built on top of the standard.
Contrary to belief, we think that standards can often be more flexible than from-scratch approaches. They can also foster more innovation, because builders can spend less time building the underlying infrastructure and more time building the actual application.
Enshrining liquidity and market structure at the network-level may seem like a new, confusing paradigm, but it brings forth multiple advantages. Applications share the unified pool of enshrined liquidity with each other, instead of competing for it. This induces a dynamic where each application doesn't fragment liquidity further, but grows it instead.
Moreover, applications sharing a unified market structure socializes access to asset pairs, markets and collateral types to all applications. This means that an asset pair added by an application can be accessed and listed by every other application. For users, this means a unified experience. Imagine moving to a new application, but you could use the same account, same collateral, and same positions as the application you were using before, without depositing or migrating manually.
The Spicenet Trading Stack is an enshrined core component of the Spicenet blockchain, providing extensible building blocks for a developer to create their own customized trading application. It features key primitives, such as
Matching Engines
Risk Engines
Instrument and Market Creation Frameworks(see )
Margin Accounts(see )
Orderbooks
Tokenized Asset Pools(AMMs)
Global vs Local Settlement Styles(see )
Smart Wallets(see )
Deposit Interfaces
A developer can choose to mix-and-match these primitives in any shape and form to create their own, fully customized financial application. The main objectives of the Spicenet Trading Stack are:
Standardize key infrastructure to remove development overhead for builders, allowing them to focus on developing innovative financial applications, in weeks, not months or years.
Enshrine market structure and liquidity primitives into the base layer, ending fragmentation, unifying liquidity and inducing incentives for applications to grow liquidity, not compete for it.
In the coming pages, we will discuss about curated primitives of the Spicenet Trading Stack.