9 min read
Revolutionizing Limit Order Trading: How DeGate is Disrupting the Decentralized Exchange Landscape
DeGate is a Decentralized Exchange protocol that leverages Zero Knowledge technology to provide a fast, efficient, and secure trading experience within the Ethereum ecosystem. Being a DAO-centric protocol, DeGate ensures that it is governed by the community, making it truly decentralized. As a protocol of the community, by the community, and for the community, DeGate is a highly transparent and community-driven project that prioritizes the needs and concerns of its users.
DeGate is a Decentralized Exchange (DEX) protocol built on Zero Knowledge (ZK) technology. This cutting-edge technology increases security, privacy, and efficiency in decentralized trading. As a ZK Rollup, DeGate fills a crucial gap in the market by providing spot order book trading and grid trading within the Ethereum ecosystem, offering an experience similar to centralized exchanges (CEX) while maintaining the advantages of decentralization.
One of the most significant advantages of DeGate is its ability to provide a seamless trading experience for users. By utilizing ZK Rollup technology, DeGate allows users to trade efficiently without compromising security or privacy. Aggregating multiple transactions to achieve this into a single transaction, which is then submitted to the Ethereum blockchain. This approach dramatically reduces gas fees and transaction times, making trading more accessible and cost-effective.
DeGate is a DAO-centric protocol, with a DAO fully controlling its treasury. This approach ensures that the community governs the protocol, making it truly decentralized. The DeGate DAO enables community members to participate in the decision-making process by voting on proposals, ensuring that the protocol is constantly evolving and improving to meet the needs of its users. Additionally, the DAO is responsible for allocating funds for development, marketing, and other operational expenses, ensuring the long-term sustainability of the protocol.
First things first. What is zero-knowledge technology?
Zero-knowledge proof executes that rollup on a Layer 2 network, such as ZK-Sync, Loopring, and Starkware, by submitting a validity proof. It uses a clever piece of cryptography called Zero-Knowledge proofs. In this model, every batch of transactions submitted to Ethereum includes a cryptographic proof called a SNARK (Succinct Non-Interactive Argument of Knowledge) verified by a contract deployed on the Ethereum leading network. This proof acts as a receipt that the rolled-up transactions are indeed authentic and, as such, added to Ethereum.
In other words, ZK-rollup presents the public validation of a particular block without revealing the crucial details of the block; by reducing transaction data load, ZK-rollups improve privacy and enable cheap and fast transactions. More can be found here.
DeGate allows for spot trading through limit orders and grid trading. It was designed to solve decentralized exchanges' major issues: high gas fees, slow transaction times, and poor user experience.
The spot trading function of DeGate is based on a ZK roll-up technology, which allows for faster and cheaper trading than conventional AMM DEXes on the Ethereum mainnet. The protocol matches limit orders between traders through its match node, recording transactions periodically on the mainnet. This provides a trading experience similar to a centralized exchange but with the added benefits of being trustless and permissionless. In addition, to reduce gas fees for users, DeGate has implemented gas-saving features, such as the gas-saving deposit option, which reduces the one-time gas deposit fee by up to 75%, and Ultra-Efficient Gas Saving (UEGS) technology, which ensures significant gas savings while maintaining a decentralized protocol.
In addition to spot trading, DeGate also offers grid trading, which replicates grid trading on a centralized exchange. This allows users to implement a trading strategy based on the ups and downs in a trading pair. With the advantages of DeGate's free maker orders, this feature can help users earn long-term and stable returns safely in the highly volatile cryptocurrency market without the assets being customized by a centralized entity.
DeGate's design is based on three principles: fully decentralized, trustless, and permissionless. The protocol is designed to be based on an open network composed of thousands of nodes, with no one running the service in a centralized fashion. This ensures the system is unstoppable. Anyone can download the protocol from the open-source code on GitHub or a similar website. The user always has the highest authority, and no negative or centralized control has access to the user's assets. The system is an open protocol, meaning anyone can list any token on DeGate, and anyone with a wallet can use DeGate.
DeGate aims to be a completely trustless, decentralized, and permissionless protocol. It relies on three primary factors to achieve this goal: ZK-Rollup data availability, the absence of an AdminKey requirement, and the Exodus Mode.
ZK-Rollup technology is a promising solution to scale the Ethereum Blockchain. It increases scalability by processing many transactions and “rolling” them into a transaction on a base layer, significantly reducing cost. In the DeGate protocol, a relayer generates proof through an off-chain circuit program. The relayer collects many transactions to generate a SNARK proof, a hash-like content representing the changeset to the state of the DeGate protocol. Verification of this proof is done through immutable open-source intelligent contracts that ensure the trustlessness of the system.
For complete decentralization, the DeGate protocol is created without an AdminKey. Once the protocol is deployed, its code execution logic becomes immutable. The smart contract and the circuit program are bound to generate verification keys in the first initialization phase. If any part changes, the function of the program will be destroyed. This ensures that the contract's deployment and the circuit program's binary are always in one-to-one correspondence.
The Exodus Mode provides an availability guarantee to users. The protocol must host users' assets in intelligent contracts in the ZK-Rollup technical architecture. Although the assets are secured by cryptography and an immutable protocol, there is still a risk of unavailability if the DEX operator goes offline. The Exodus Mode enables users to retrieve their assets in such a scenario. Suppose any mandatory withdrawal has been processed for at most 15 days. In that case, anyone can trigger a transaction to enable the Exodus Mode of the DeGate protocol. This process is irreversible, which means that this deployment instance of the DeGate protocol is no longer usable. The only thing that can be done is for users to withdraw assets by directly providing data proof as a parameter to the smart contract. Users can restore their data from historical call data stored on Ethereum.
DeGate is also working on decentralizing operators to reduce the risk of denial of service, dropped orders, and changing transaction orders from a single operator node. The platform aims to establish a consensus network with a punishment mechanism similar to public chains to move towards an ultimate trustless protocol. By implementing these measures, DeGate hopes to achieve complete decentralization, trustlessness, and permissionlessness, ensuring that malicious actors can “do no evil.”
DeGate's unique approach to enabling anyone to list any assets on its DEX is an essential innovation for the DeFi industry. While Uniswap popularized the concept of fully permissionless listing on its AMM protocol, DeGate takes this further by enabling any asset pair to be traded with limit orders instead of market order swaps.
However, implementing permissionless listing in a public protocol is difficult due to significant economic and functional security issues. Typically, whether to list a new trading pair on a DEX is made through DAO governance or admin authority. DeGate tackles this issue by using a complete gas fee calculation mechanism to ensure the sustainability of the protocol. Gas-related fees ensure data availability and perform on-chain transactions on the mainnet. Multiple currencies are supported for paying gas fees, which can be combined to fill actual orders placed. A rigorous mechanism of economic security is implemented to prevent the protocol from being abused, even as an open system.
Despite the benefits of this approach, there are certain limitations to consider. For instance, DeGate's mechanism is not friendly to rebase tokens and tokens with a backdoor. These tokens can cause smart contract errors and reflect incorrect balance changes, leading to potential user losses. Therefore, DeGate advises users not to deposit such tokens and will not be responsible for losses caused by their operation.
DeGate's operational structure is designed to provide maximum control to its DAO members, who are also DG token holders. The DAO's primary responsibility is to oversee the DeGate protocol and make decisions regarding the protocol's Treasury. This ensures that the community is involved in decision-making and governance, a crucial aspect of decentralized finance.
Furthermore, Home DAO has established several foundational principles, such as being responsible for any losses caused by the DeGate protocol's negligence and minimizing the tyranny of the token majority. These principles help create a social contract that governs the protocol and ensures that the DAO acts in the community's best interest.
Regarding revenue generated by the protocol, the Home DAO has complete control over how to allocate it. They may decide to convert a portion of it into DG and store it in a Home DAO account/treasury or burn it, among other options. As a result, the community has a say in how the protocol's revenue is distributed.
DG token holders can initiate governance proposals only if they meet the minimal DG ownership requirement. This ensures that those with a significant stake in the protocol are making decisions that could impact the community as a whole.
DeGate will have its native token DG with a total supply of 1 billion, wholly owned by Home DAO initially. The token allocation plan is designed to ensure the protocol's sustainability and growth while incentivizing the community to participate in the network.
- The founding team will acquire 19.8% of the DG tokens for $990,000, which will vest linearly over four years. The unvested tokens cannot be transferred, but they will otherwise have the same token rights. The raised proceeds will go to the Home DAO treasury.
- The majority of the tokens, 44%, will be allocated towards liquidity mining, with 4% given for a DG: KEY token-swap offering to BIHU and MYKEY users. This will help build consensus and expand DeGate's reach immediately, leveraging the sizable BIHU/MYKEY community. This allocation pool will also pay operational expenses related to community-building and marketing.
- The 20% financing allocation can be offered publicly or privately to strategic parties to raise capital for continuous growth. The privately offered prices must be derived from publicly traded ones. The Home DAO treasury will own all raised proceeds.
- The 9% business development allocation will compensate strategic partners for services, support, and other forms of collaboration. The budget can also be sold via structured products to strategic partners to align long-term interests. The Home DAO treasury will own all raised proceeds.
- 5.2% of the DG tokens are reserved for Home DAO on any unforeseen or immediate needs, and 2% is allocated to a liquidity pool. Half of the 2% allocation will be deployed to an AMM pool at the Founder Financing round valuation of ~5 million USD to bootstrap day one token liquidity. The remaining half will be deployed into the same pool for further liquidity. The Home DAO treasury will own all raised proceeds.
The DG token allocation plan is designed to ensure the sustainability and growth of the DeGate protocol. It incentivizes the community to participate in the network, provides liquidity for the token, and compensates strategic partners for their collaboration.
In conclusion, DeGate is a unique open protocol that aims to bring enormous value to the industry by building a limit-order decentralized exchange with fully open trading pairs. The platform is built on a permissionless listing, which is challenging to implement in a public protocol due to significant economic and functional security issues. However, DeGate has implemented a rigorous financial security mechanism to ensure the protocol will not be abused even as an open system. Overall, DeGate's approach to permissionless listing and its robust mechanism of economic security are promising. The allocation of DG tokens also shows a clear growth and development strategy, focusing on community building and strategic partnerships. How DeGate will perform in the highly competitive DeFi market remains to be seen. Still, it is a platform worth keeping an eye on.
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