Introduction:

As the cryptocurrency industry matured, centralized exchanges (CEXs) began to resemble traditional financial markets. The trading volumes of major centralized exchanges like Binance, OKX, Gate.io, and Bybit have steadily increased, establishing these platforms as the primary venues for cryptocurrency trading. However, the rise of regulatory challenges and a series of bankruptcies or shutdowns within the CEX sector have led to a noticeable decline in trading volumes.

In their early stages, decentralized exchanges (DEXs) had advantages in transparency and decentralization, but they struggled to match centralized platforms in terms of liquidity, trading speed, and user experience. This was largely due to the fact that traditional DEXs were often limited to a single blockchain, resulting in liquidity being fragmented across different chains, making it difficult to fully utilize.

DEX trading models can be categorized into order book and AMM (Automated Market Maker) models, with their trading depth directly linked to liquidity levels. High liquidity enhances trading depth and reduces slippage, relying heavily on active market makers. In contrast, the AMM model faces challenges such as higher slippage on large orders and the risk of impermanent loss for liquidity providers (LPs).

The order book model demands high performance in matching and executing trades, relying on market makers to provide liquidity through placing orders, with real-time prices determined by market dynamics. This model offers a trading experience similar to that of CEXs and is better suited for markets with substantial liquidity. However, starting a new project using this model can be challenging. Its main advantage lies in the fact that large orders are less susceptible to slippage. Addressing these challenges, Orderly Network positions itself as a decentralized order book protocol, combining the liquidity and trading speed of CEXs with the transparency, sovereignty, and on-chain settlement features of DeFi. It offers developers matching engines and liquidity solutions, simplifying the integration of perpetual futures or spot trading into their applications. This article will explore the foundational logic of the protocol, detailing the product’s implementation path, economic model, and current development status.

A Comprehensive Guide to Orderly Network (ORDER)

What is Orderly Network?

Orderly Network integrates the advantages of centralized and decentralized exchanges (CEX and DEX), offering low latency and centralized liquidity while preserving the transparency and self-custody of assets typical of decentralized platforms. Built on the Near ecosystem, the protocol was launched in April 2022 as a joint venture between Near and WOO Network. It utilizes smart contracts for peer-to-peer trading and provides a cross-chain derivative liquidity layer, enabling users to trade directly from the foundational layer for a seamless experience. Additionally, the DEX on the Ethereum mainnet can support perpetual contract trading powered by Orderly Network.

The team’s co-founders, Ran Yi, and Terence Ng, bring a wealth of experience in the blockchain sector, having previously worked on the cross-chain DEX WOOFi protocol. Recently, the team secured $5 million in funding from investors, including OKX Ventures, Manifold Trading, Presto Labs, LTP, Nomad Capital, and Origin Protocol. The team plans to use the funds to develop new products and strengthen on-chain liquidity.

Source: orderly.network

How Does it Work?

Orderly Network introduces a groundbreaking all-chain liquidity aggregation system that combines liquidity from multiple blockchains into a single, unified order book. This approach resolves the liquidity fragmentation problem commonly seen in DEXs, significantly improving both trading depth and efficiency. The protocol utilizes a Central Limit Order Book (CLOB), which integrates features from both centralized and decentralized exchanges.

The all-chain management of the order book is organized into three key components: the asset layer, the settlement layer, and the engine layer, as follows:

1. Asset Layer (Asset Vault): This layer is responsible for managing user interactions related to registration, deposits, and withdrawals on each supported blockchain. It serves as the storage location for user funds.
2. Settlement Layer (Orderly2): Serving as a transaction ledger on a single chain, this layer records all transactions and user data, without direct user interaction.
3. Engine Layer (Order Book): This layer oversees order management and trade execution, including the matching engine and risk management services. Orders from various blockchains are aggregated here, centralizing liquidity and making the system indifferent to the underlying blockchain.

Source: orderly.network

Users deposit their assets into the asset layer, and brokers on the Orderly platform initiate transactions. The deposit and order details are then sent to the engine layer for order matching. Once orders are matched, they are uploaded and settled on the Orderly L2 chain, which leverages the OP Stack and periodically settles on the Ethereum blockchain. LayerZero facilitates communication between these layers, ensuring smooth and efficient transactions.

On the Orderly Network platform, users can trade both spot and perpetual contracts, with all spot markets requiring USDC as the trading currency. The on-chain order book system’s Perp aggregator records and manages all buy and sell orders in real-time. This order book aggregator quickly matches buy and sell requests, ensuring rapid transaction execution. Leverage traders can use perpetual contracts to hedge or speculate on long and short positions. The aggregator’s provision of fast execution and deep liquidity allows traders to perform leveraged trades more efficiently.

Orderly Network employs three methods to protect users from MEV (Miner Extractable Value) attacks: first, by fast matching through the sequencer, which reduces opportunities for MEV extractors to front-run orders; second, by batching transactions before they are submitted to the blockchain, thereby minimizing MEV risks; and third, by ensuring that all transactions are settled on-chain.

Unified Order Book Model

A key feature of Orderly Network is its unified order book system, allowing users to trade across blockchains while managing all transactions within a single order book. This system removes the typical need for bridging operations in cross-chain trading, making the process more seamless and efficient.

With this on-chain order book, developers can create modular DApps, ranging from simple trading interfaces to more complex financial tools like perpetual contracts and lending platforms. Orderly Network also offers ready-to-use SDKs and APIs, making it easy for developers to integrate order book functionalities into their DApps without building complex trading systems from the ground up. This approach greatly reduces both development costs and time.

Cross-chain Liquidity

Orderly Network enhances its platform by aggregating liquidity from multiple blockchains, offering a wider asset pool to accommodate diverse user trading needs. This approach also results in narrower spreads between buy and sell orders, allowing users to trade closer to market prices, thereby minimizing slippage.

Orderly Network is built on the NEAR blockchain, which utilizes a sharding technology called “Nightshade” to enable horizontal scaling. Each shard handles a portion of the network’s transactions and data in this system, allowing NEAR to maintain high efficiency even as transaction volumes increase. NEAR’s blockchain features a block time of approximately 1 second, with most transactions confirmed within 1-2 seconds. This enables Orderly Network to deliver a nearly real-time trading experience, reducing the risks of delays and transaction failures.

Moreover, Orderly Network is integrated with both EVM and non-EVM blockchain ecosystems, supporting popular Layer 2 chains such as Arbitrum, Optimism, and Polygon PoS and the non-EVM NEAR protocol.

Tokenomics

ORDER is the native token of Orderly Network, and the team recently unveiled the tokenomics. An airdrop is scheduled to occur soon, and specific details about the token’s launch date, release schedule, and claim process will be announced soon.

The total supply of ORDER tokens is set at 1 billion. Of this, 55% will be allocated for ecosystem development, including the airdrop (13.3%). Another 20% will be reserved for the Orderly team and advisors, 15% will go to strategic investors, and 10% will be kept in the Orderly Foundation’s treasury to support future liquidity and related initiatives.

The airdrop will distribute 13.3% of the total token supply, and all airdropped tokens will be fully unlocked at the token generation event (TGE). Any tokens not claimed within 60 days will be returned to the Orderly treasury.

Source: orderly.network

Source: orderly.network

The ORDER token serves primarily for staking and governance. For staking, token holders can earn 60% of the platform’s net trading fee revenue by staking their ORDER tokens. As of the team’s announcement of the new tokenomics, the platform has generated over $8 million in trading fee revenue. After the TGE, 60% of the new net trading fees will continue to be allocated to ORDER token stakers, with rewards paid out in USDC upon redemption. It’s important to note that tokens allocated to the team and investors will not be eligible for staking rewards during their lock-up period.

Additionally, ORDER tokens will offer extra rewards to traders using DEXs integrated with Orderly Network. In the future, staking will be a crucial factor in calculating trading and market-making rewards, and there may be an increase in the percentage of net trading fees distributed to stakers. More information on new trading and market-making rewards will be provided shortly after the token launch. The staking feature will be launched soon after the TGE, with details on the exact date and time to follow.

In terms of governance, the team plans to establish a development entity and a foundation to oversee the protocol. ORDER token holders will gain voting rights, enabling them to participate in ecosystem governance.

Current Development Status

Orderly Network has attracted significant capital and a growing user base by combining the strengths of both CEX and DEX, which are supported by its innovative infrastructure and strong partnerships. Currently, the platform’s total value locked (TVL) is approximately $23.69 million, with the Optimism chain holding the largest share of liquidity, close to $10 million.

Source: dune.com

Based on third-party data, the 24-hour trading volume on the Orderly Network platform is $69.14 million, with 420,000 users and more than 291,618 unique wallets.

Source: dune.com

Conclusion

Orderly Network successfully merges the strengths of CEX and DEX by implementing a unified order book system and cross-chain liquidity, effectively mitigating the problem of liquidity fragmentation. For traders, the on-chain order book provides real-time market prices and order matching information, ensuring a highly efficient and transparent trading experience. Additionally, by integrating liquidity across multiple blockchains, Orderly Network enhances both trading efficiency and depth.