Filling the Gaps in the Decentralized Trading Experience
Common seeks to resolve the core issues traders face in the digital asset landscape: price efficiency, privacy, and custody. While centralized exchanges offer excellent liquidity and somewhat private transactions, they require users to entrust their assets to a third party. Decentralized exchanges (DEXs), on the other hand, face challenges in price efficiency due to low liquidity and risks associated with Miner Extractable Value (MEV) bots.
Three Pillars of Common
Price Efficiency: Common addresses this by aggregating liquidity from various on-chain and off-chain sources, aiming to offer competitive prices.
Privacy: The platform's shielded pool protects the details of an order, ensuring that transactions remain confidential.
Custody: In Common, assets are held in a shielded pool, allowing for a self-custodial approach that eliminates the need to trust a third party.
Addressing Miner Extractable Value
MEV bots exploit the transaction pool to either front-run or back-run orders, skewing market conditions against the trader. Common effectively mitigates the impact of MEV through its unique dutch auction mechanism. This model starts with a high initial price that reduces incrementally until a buyer is found, making it less profitable for bots to manipulate the system.
The Inner Workings of Trade Execution
Private Matching. Common uses an internal order book that first attempts to match private orders. These orders are aggregated in specific price ranges, hiding the size of each trade to protect users' privacy.
Dutch Auctions. If the trade isn't fully matched internally, the remaining part is sent to a public dutch auction. This process not only facilitates price discovery but also minimizes the MEV impact by making profit opportunities less immediate for specialized actors.
Fee Structure. Common's design stipulates that the initial phase of order matching incurs no fees, contrasting with many other platforms where fees are a significant concern for traders.
Enhanced Flexibility
Common allows users to cancel their orders even if partially filled, a feature that provides an experience similar to what traders find on centralized platforms.
Compliance Outside the Pool
While transactions within the shielded pool are private, compliance procedures occur outside of Common, primarily during the transition of funds into the shielded pool.
With its unique features, such as the dutch auction mechanism, shielded pools, and aggregated liquidity, Common stands out as a groundbreaking solution in the DEX arena. It skillfully addresses the major challenges of price efficiency, privacy, and custody, setting a new standard for decentralized trading.
Source: "Common Whitepaper with Damian Straszak" Podcast
Website: common.fi