What is Flash Trade?

By Kinetex Network, compiled by Luccy, BlockBeats

Editor’s brief: Kinetex Network, a fully decentralized protocol based on Zk proofs, has launched a new generation of dApp Flash Trade, which combines technologies such as cross-chain parsing, Zk technology, and clearing systems to allow users to exchange crypto assets directly with professional parsers (market makers), simplifying the entire exchange process.

This article is from the official blog of Kinetex Network, and will be summarized into a compilation of Flash Trade related articles, which will be continuously updated by BlockBeats, and the following is the original compilation:

Flash Trade is an innovative model for Kinetex dApps. Let’s take this opportunity to talk more about the benefits of this model and the technologies that the Kinetex team is using to make them happen.

With Flash Trade, users can exchange crypto assets directly with professional parsers (market makers), and this method greatly simplifies the exchange process. Users simply select the token they want to swap and enter the desired amount, and the parser can manage the transaction from there. When a user agrees on an exchange rate, they sign an order that allows the parser to access their assets. The parser must provide collateral in excess of the order amount before executing the order to ensure the safety of the user’s assets in the event that the order is not executed on time.

Flash Trade was created by the Kinetex team after considering the key challenges facing the blockchain industry today. While the liquidity aggregation model is useful for transferring assets across chains in a convenient way, it does not allow for instant transactions. By leveraging native liquidity, Flash Trade guarantees fast execution times, fixed interest rates, enhanced security, and more.

Let’s take a closer look at the most significant benefits of Flash Trade.

Speed

Speed is one of Flash Trade’s most prominent strengths. This mode works by setting a time limit for the parser to execute its selected order, which usually does not exceed two minutes. Within this time, the parser should complete the order, otherwise, the order will be liquidated. During liquidation, orders can be filled by the resolver’s collateral or filled by the liquidator, who will receive the resolver’s collateral as a reward (see below for more information on the clearing system). As a result, users receive their orders quickly every time. In addition, the competition between parsers also greatly speeds up the process. When they compete with each other, they are motivated to work faster, reducing the time it takes to complete orders.

Security

MEV protection

The next advantage is made up of several elements: protection from MEV attacks, no need for bridges and third-party validators, and a liquidation system. First of all, MEV is a well-known phenomenon that is increasingly discussed in the cryptocurrency industry. It stands for Maximum Extractable Value and refers to the profits that validators can make when they manipulate the transactions they validate and strategically conduct their own transactions.

While it helps attract more validators to help keep the blockchain running by providing them with more profit opportunities, it can also lead to a degraded user experience, as they can be heavily exploited every time. To protect users from MEV attacks, the Kinetex team decided to stop using validators and mempools in favor of a straightforward peer-to-peer model. This is made possible by the use of zero-knowledge technology, known as Zk proofs. In addition, third-party authenticators are often hacked or compromised, posing a serious security risk even without MEV. Therefore, running the system without them is a great benefit.

There are no new Wrapped Tokens

Second, Kinetex’s decision to allow P2P orders has a significant advantage: it eliminates the need for Kinetex to create new Wrapped Tokens. This is important because the new Wrapped Tokens can cause some problems, such as hacking and liquidity freezing and fragmentation. Unfortunately, the crypto community still suffers from bridge hacks from time to time, highlighting major security issues that the industry has yet to address. In addition, locking assets in smart contracts while creating new tokens and generating them on different networks can exacerbate liquidity issues, especially for lesser-known crypto assets. As a result, by opting out of the creation of new Wrapped Tokens, Flash Trade can prevent the security risks associated with cross-chain transfers via bridges and help improve liquidity between different chains.

Clearing system

Third, a fully decentralized, Zk-based clearing system is the last crucial part of Flash Trade that helps enhance its security. The Kinetex development team designed the system to be open and public, which means that anyone can be a part of it and support the integrity of the Kinetex system. The liquidator checks the orders and finds the expired ones, and the parser is unable to fill them on time for some reason. Once such an order is found, the liquidator can fill out the order, generate a proof of completion, and claim the collateral allocated by the parser for this order.

Driven by liquidators’ collateral, there is a high level of competition among liquidators trying to act as quickly as possible. As a result, Kinetex is able to ensure fast and guaranteed execution of trades for all users.

Great price and no slippage

Another advantage of Flash Trade is undoubtedly the rates. In order to successfully compete with others, parsers need to analyze user requests and offer competitive prices to users they are interested in. Users can then view different proposals and choose their favorite. As a result, all parsers actively offer the best rates possible in order to maintain demand.

In addition, there is no price slippage as the user exchanges directly with the parser after selecting the best conditions. Users get exactly what they want without being deprived of it.

Gas optimization

The last substantial advantage of the Flash Trade model is gas optimization and a gas-free process. Thanks to the innovative zero-knowledge technology used by Kinetex, transactions can be processed together in batches. As a result, the Flash Trade model reduces the number of individual transactions that need to be processed, which lowers the overall cost of executing each trade, eliminates unnecessary gas payments, and saves time.

In addition, users do not need to pay gas fees themselves when using Flash Trade, as the parser handles all operations to complete the order, including gas payments. This approach creates a gas-free flow that eliminates the need for users to store multiple native tokens in their wallets.

Source: Golden Finance