Jump Crypto aims to rewrite blockchain trading with speed-agnostic fairness.

Jump Crypto has proposed a new market mechanism known as the Dual Flow Batch Auction (DFBA), aimed at addressing key inefficiencies in traditional Continuous Limit Order Books (CLOBs) on blockchain platforms. The mechanism seeks to mitigate challenges such as latency arbitrage and miner extractable value (MEV), which have led to increased transaction costs and reduced liquidity for traders. By eliminating time-based competition, DFBA shifts the focus from speed to price and size, enabling a more equitable and efficient trading environment [1].

In traditional CLOBs, continuous matching and time-priority mechanisms have created an environment where latency arbitrage and MEV exploitation thrive, particularly in decentralized markets. This often results in higher trading costs and adverse selection for market makers. Jump Crypto’s DFBA mechanism aims to neutralize these issues by batching trades into two independent auctions every 100 milliseconds. This approach ensures that all participants trade at a single fair clearing price, reducing the advantages typically held by high-speed traders or block producers [2].

DFBA separates orders into maker and taker groups, with maker orders submitted by liquidity providers and taker orders from natural-flow traders seeking prompt execution. This structure allows for simultaneous dual auctions, where maker buy orders are matched against taker sell orders and vice versa. Unlike traditional CLOBs, where the last order to arrive determines the taker/maker designation, DFBA assigns these roles based on the intent of the order submitter. This change ensures a fairer system where liquidity providers compete on price and volume rather than speed [2].

One of the key benefits of DFBA is its ability to deliver tighter spreads and deeper liquidity. By reducing the adverse flow that typically impacts market makers, the mechanism incentivizes tighter and more consistent quoting of prices. This is particularly significant in decentralized markets where liquidity can be fragmented. Jump Crypto argues that the design not only inherits the strengths of existing models—such as continuous liquidity and auction fairness—but also avoids their weaknesses, including high slippage and MEV vulnerabilities [2].

The proposed mechanism also considers the user experience, balancing speed and fairness for natural-flow traders. Jump Crypto suggests that an auction interval of around 100 milliseconds to 1 second meets both latency and user experience requirements, ensuring that trades appear continuous to end users while preventing unnecessary competition over nanoseconds. This interval also minimizes the impact of price volatility during the auction period, reducing the risk of mispricing for traders [2].

DFBA introduces new possibilities for fee structures that align more closely with the value provided to natural-flow traders. Traditional CLOBs often require complex fee tiers to account for the volume of non-economic trades, such as scalper or liquidity provider versus liquidity provider trades. In contrast, DFBA’s focus on natural-flow volume allows for simpler and more transparent fee models, where fees can be based on price proximity to the midpoint or fixed per trade. This approach enhances fairness and provides clearer pricing signals for traders [2].

Jump Crypto's proposal represents a significant step toward creating a blockchain-based market structure that prioritizes fairness and efficiency over speed. By addressing the structural issues inherent in traditional CLOBs, DFBA offers a robust framework for decentralized exchanges aiming to reduce latency-driven inefficiencies and improve liquidity. The mechanism's emphasis on price-based competition and uniform clearing prices could lead to more stable and transparent market conditions, benefiting both liquidity providers and traders [1].

Source:

[1] title1 (https://www.theblockbeats.info/flash/308746)

[2] title2 (https://jumpcrypto.com/writing/dual-flow-batch-auction/)