What is Vessel Finance?

Vessel is a zero-knowledge-proof decentralized exchange that combines the efficiency of centralization with the security of decentralization. It achieves this using its ZK-proof circuits, AMM-embedded order book, and self-custody asset management features.

The Vessel platform is built on the Scroll network and designed to execute transactions off-chain while maintaining on-chain security. Its features allow Vessel to provide asset security through self-custody, transparent execution using ZK proof, and improved performance using AMM integrations.

History of the Vessel Exchange

Vessel was created by the founders of the Scroll L2 network, Sandy Peng and Ye Zhang. They launched Vessel in 2023 and had their testnet up and running by June 2024. This led to its mainnet launch in August 2024.

The Vessel project secured $10 million in a seed funding round in the same month to further develop the platform and ecosystem. Key players like Sequoia Capital, Avalanche Foundation, and Algorand Foundation participated in the funding round.

Core Components: Zero Knowledge Proof, Sequencer, Prover, and Smart Contract

Source: Technical Deep Dive | Vessel (gitbook.io)

Zero-knowledge Proof (ZKP)

ZKP allows parties to prove the validity of information or transactions with another party without revealing the actual information. It usually consists of a system of provers, verifiers, and challengers to validate information publicly.

As a decentralized exchange, Vessel uses ZKP to ensure the platform can validate transaction requests without compromising users’ identities. It also ensures malicious actors are isolated from the system without revealing information to these bad players.

The Sequencer

The sequencer on Vessel’s exchange is a server that organizes user requests for processing and updates the state, which will be proven later. The sequencer has four components: the gateway, matching engine, data server, and witness generator.

The gateway inspects user requests and filters out potentially malicious activities. This component helps protect the platform’s integrity against bad actors.

The matching engine processes the user’s orders and updates the exchange’s internal state, facilitating a smooth transacting experience. The data server component accesses real-time market data, which is streamed to the APIs for traders.

This allows traders to make informed decisions about the market situation while updating the platform. The witness generator produces the witnesses the prover requires to validate the information.

These components allow the sequencer to process transactions with high speed and efficiency.

Prover

The Prover is tasked with checking all the transactions submitted by the Sequencer to ensure their validity. It uses the ZK feature to ensure this validated information is not revealed.

This allows users to trade confidently while keeping their information private. It also helps the exchange work faster by quickly verifying transactions.

It utilizes Succinct Non-interactive Argument of Knowledge (SNARK) proofs to ensure the system’s integrity and user’s privacy. The SNARK feature allows the prover to create proofs that show the Sequencer is working correctly.

It also prevents unauthorized actions, such as creating fake money or orders. Finally, it securely updates off-exchange records using the innate ZK rules.

Smart Contract

This set of rules stored on the blockchain controls how VESSEL operates. it stores SNARK proofs for verification and finalization. It also holds users’ funds in a secure digital vault, allowing for automated trading and other DeFi features.

When new features are added or adapted due to changes in the crypto market, they are reflected on the platform using smart contracts.

Features of The Vessel Ecosystem: AMM DEX, Self-Custody Asset Management, VAELOB, and Decentralized Governance Mechanism

AMM DEX

Source: Vessel (gitbook.io)

The Vessel exchange is a decentralized exchange (DEX) that has achieved enhanced automated market-making (AMM) capacities. The platform is designed to improve liquidity efficiency while conducting trades.

This feature lets users provide liquidity and enjoy competitive returns through trading fees shared with all liquidity providers. It uses advanced algorithms to improve trade executions, reduce slippage, and offer attractive options to liquidity providers.

The AMM feature is built with the sequencer and prover, allowing efficient transaction processing and verification. The platform also uses automated market-making strategies that adjust based on real-time market conditions.

Self-Custody Asset Management

Source: Vessel (gitbook.io)

Vessel’s self-custody feature allows users to manage their assets, giving them complete control over said assets. This feature aligns with the principle of “Not Your Keys, Not Your Coins,” ensuring that users maintain ownership and security of their funds at all times.

The feature promotes trust and security by ensuring that assets are not pooled in the protocol, which attracts malicious players. It also combines ZK proofs to protect users from third-party integrations and improve security.

The self-custody model allows the Vessel exchange to be a decentralized exchange, prioritizing user autonomy and security when executing trades.

Verifiable AMM-Embedded Limit Order Book (VAELOB)

Source: Vessel.Finance

Vessel’s verifiable AMM-embedded limit order book (VAELOB) combines the benefits of automated market-making with traditional limit order book functionality. This feature allows users to set trades and provide liquidity simultaneously, enhancing the flexibility of trading on Vessel.

The VAELOB feature aims to create a win-win situation between liquidity providers and traders. It optimizes users’ trade requests by fulfilling part of the trade using sell orders and the other using the AMM pool.

The fees from each transaction are returned to the AMM pool and shared with liquidity providers. The algorithm also determines the transaction fee arithmetically, using information such as tick spacing, order size, fee rate, and AMM pool size.

The VAELOB feature ensures users achieve capital efficiency, while the ZK-proof feature ensures all transactions are transparent.

Decentralized Governance Mechanism

Vessel’s decentralized governance structure allows token holders to participate in decision-making ranging from protocol upgrades to community initiatives.

Vessel’s governance framework, supported by the VESSEL token, ensures all stakeholders have a voice in the platform’s development. It enhances the community’s trust and improves collaboration, essential for the project’s long-term success.

What is the VESSEL Token?

The VESSEL token is the native token of the Vessel ecosystem. It is designed to provide utilities, incentivize community participation, and enhance Vessel’s functionality. The token is built with the BEP-20 token standard and has some cross-chain interoperability features.

There are currently 5 trillion VESSEL tokens on the Binance smart chain, and few transactions have been conducted using the token.

Risk Analysis

Advantages

Vessel employs zero-knowledge proof technology, which allows transactions to be verified without revealing sensitive information. This ensures user privacy and security, which addresses a major concern surrounding centralized exchanges.

The platform operates under the “Not Your Keys, Not Your Coins” principle, enabling users to control their assets fully through self-custody. This feature enhances trust and reduces the risk of loss associated with third-party custodians.

The vessel’s architecture supports a performance throughput of 1,000 TPS while offering zero gas fees for users. Speed and cost-effectiveness are attractive to traders looking for efficient trading solutions.

Disadvantages

While ZK proofs enhance security, they can also make it more difficult for less experienced users to understand and use the platform.

Challenges

The ZK-proof technology is a new addition to the crypto space, and much development is underway. This can affect global adoption as the innovative technology is not fully battle-tested.

As an addition to the crypto space, the ZK-proof technology has attracted the attention of developers looking to fully utilize its capacity. As a result, multiple DeFi projects offer similar privacy-focused features using ZK proofs.

This would make it difficult for the Vessel exchange to stand out, requiring further innovative development to capture market shares. The Vessel project is also part of the crypto space, subjecting it to the volatility and uncertainty surrounding it.

Competitive Analysis

The Vessel exchange and ZKEX are decentralized exchanges that use ZK proof to provide CEX features to users. However, they cater to different users and focus on different core features.

While Vessel is focused on a seamless user experience, ZK proofs are used for transaction verification, security, and user privacy. The ZKEX exchange focuses on interoperability and multi-chain transactions.

Vessel’s primary users are traders seeking secure, efficient trades combined with adequate user experience. ZKEX’s primary users require a versatile trading platform that supports multiple assets and chains.

While the ZKEX exchange uses the order book feature to provide efficient trades, the Vessel exchange utilizes the VAELOB. The VAELOB is an upgraded order book feature that allows Vessel users to utilize their capital efficiently while earning higher rewards.

How Can You Own the VESSEL Token?

Users can follow a simple process to own VESSEL tokens and become a part of the Vessel ecosystem.

Setup a Wallet

One way to own VESSEL tokens is to purchase them through an exchange. To do so, the user must create a Gate.io account, complete the KYC process, and add funds to the account to buy the token.

Utilize the VESSEL Tokens

Once users have acquired VESSEL tokens, they can explore the Vessel ecosystem by conducting transactions and participating in governance.

Useful References

For the latest updates about the Vessel Finance platform, visit:

• Official Website
• Twitter

Take action on VESSEL

Learn more about the Vessel project on Gate.io.