Decentralized Trading Consensus for Fair Trade Ordering
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Solution Overview
Problem
Decentralized trading systems face challenges in ordering and matching trades across multiple network nodes due to impracticality of recording rapid market data in blockchains, leading to potential ordering discrepancies and fairness issues, especially with varying propagation delays.
Innovation Solution
A decentralized trading system where a subset of network nodes reaches consensus on the order of market trade requests and generates ordered data, which is then verified and used by matching engines across multiple network nodes to execute trades consistently, utilizing consensus protocols like Hashgraph and Merkle trees for timestamping and data verification.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If trades are recorded in a blockchain, then data integrity and verification are improved, but the system cannot handle rapid market data due to blockchain's slow recording speed
Solution Approach 1:
The system segments the trading system into two distinct components: a high-speed ordering layer that captures trades rapidly without blockchain constraints, and a verification layer that periodically snapshots and verifies this data on-chain. This segmentation allows each component to operate at its optimal speed while maintaining overall system integrity.
Solution Approach 2:
The system introduces an intermediary mechanism (snapshot/verification process) between the high-speed trade ordering and the blockchain. This intermediary periodically captures the state of the order book and verifies it on-chain, allowing rapid trading to continue off-chain while maintaining periodic blockchain verification without requiring every trade to be recorded on-chain.
2Ease of operation
If trades are ordered centrally, then ordering simplicity is improved, but fairness deteriorates due to propagation delays across distributed nodes
Solution Approach 1:
The system merges the advantages of centralized ordering (simplicity and speed) with decentralized verification (fairness and trust). Multiple independent nodes each run their own matching engines that simultaneously process the same order book state, combining simplicity of individual node operation with the fairness of distributed consensus.
Solution Approach 2:
The system creates equipotentiality by ensuring all nodes operate from the same ordered trade sequence. Through periodic blockchain verification and snapshot comparison, all nodes are kept at the same potential state, eliminating fairness issues caused by propagation delays while maintaining the simplicity of local ordering.
3Reliability
If multiple nodes independently match trades, then system reliability and decentralization are improved, but ordering consistency deteriorates without a central authority
Solution Approach 1:
The system performs preliminary ordering of trades at each node before matching. By pre-ordering all incoming trades into a consistent sequence at each node based on receipt time, the system ensures that when multiple nodes independently execute matching, they all start from the same ordered foundation, guaranteeing consistent results across the decentralized network.
Data Source
AI summary
A system includes: a plurality of network nodes communicatively coupled in a peer-to-peer network; and a plurality of computing devices each communicatively coupled to at least one of the plurality of network nodes. Computing devices transmit market trade requests to at least one of the network nodes. A first subset of network nodes (including at least two network nodes) determine an order of receipt of the plurality of market trade requests. The first subset of network nodes reach a consensus of the order of receipt of the plurality of market trade requests. The first subset of network nodes generate ordered data based on the order of receipt agreed upon by the first subset of network nodes. A second subset of network nodes (including at least two network nodes) match the plurality of market trade requests.