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Sep 21, 2023
Product
Orderly Network’s Hybrid Solution Amid CEX Challenges
by Orderly Network
orderly-hybrid-solution-amid-cex-challenges

Last week, the Hong Kong authorities outed JPEX — a Hong Kong-based centralized cryptocurrency exchange– for falsely claiming to hold licenses from foreign regulatory bodies. The SFC released this statement following countless complaints from individuals (amidst media reports) that investors are unable to withdraw their assets from the platform. On some occasions, balances were altered or reduced in accounts maintained with JPEX.

JPEX refutes the SFC’s claims, citing unfair treatment by relevant institutions in Hong Kong towards JPEX and partnered third-party market makers maliciously freezing funds. This prompted the platform to halt withdrawals by dubiously increasing its trading fees to $1000 and setting withdrawal limits to $1000.

While the probe into JPEX represents the latest in a sling of CEX challenges that have plagued the crypto industry over the years, the dangers of third-party custodial services are a common folktale within the space.

In this piece, we highlight some of these CEX challenges and introduce Orderly Network’s hybrid approach to tackling these challenges. Consider this a primer on Orderly’s Hybrid Approach, setting the stage for an upcoming series that delves deeper into our pioneering solutions.

TL;DR:

JPEX Scandal: Hong Kong’s JPEX accused of false license claims; faces withdrawal complaints. CEX Concerns: Centralized nature brings regulatory, transparency, and control issues, exemplified by FTX and JPEX. DEX Limitations: DEXs address CEX issues but face liquidity challenges and steep learning curves Orderly’s Hybrid Approach: Combines CEX and DEX benefits with on-chain settlements. Key Features: Users enjoy full ownership, CEX-level performance, and diverse integration options. Security: Transactions are transparently recorded on-chain for utmost trust. Orderly Expansion: Launch of Orderly Omnichain boosts cross-chain projects in DeFi. What’s Next: Future articles to detail Orderly’s hybrid products and vision.

The Dual-Edged Sword of CEXs

Centralized exchanges (CEXs) have been pivotal in shaping the cryptocurrency landscape, offering users a gateway to the world of digital assets with their user-friendly interfaces and robust liquidity. However, their centralized nature, coupled with regulatory challenges, opaque practices, and the inherent relinquishment of user control over private keys, has often been a pain point to the broadscale adoption of crypto trading, particularly by institutional traders.

The notable mismanagement issues of FTX leading up to its crash in November 2022, and now the escalated trading fees and imposed restrictive withdrawal caps of JPEX only further amplify some of these concerns.

Are DEXs then the Answer?

Decentralized Exchanges (DEXs), under the DeFi umbrella, address many concerns associated with CEXs, notably security breaches and regulatory hiccups. However, the DEX landscape isn’t without its challenges. Many DEXs face issues of lower liquidity compared to their centralized counterparts, leading to price discrepancies. Additionally, the user experience can be daunting for newcomers who are familiar with the traditional orderbooks, with a steep learning curve associated with wallet setups, and transaction processes.

These limitations highlight a gap in the crypto trading landscape — a space where the advantages of both centralized and decentralized platforms converge.

## Taking a Hybrid Approach — An Infrastructure to Combine the Best of Both Worlds Orderly Network believes in bridging the best of both worlds — CEXs & DEXs. Our hybrid solution encompasses a combination of an orderbook-based trading infrastructure and a robust liquidity layer offering spot and perpetual futures orderbooks.

This means that builders can deliver robust dApps that hone the best features of CEXs, such as simplistic orderbook trading interfaces while keeping settlements on-chain and maintaining full self-custody. In essence, we facilitate the building of dApps that combine the composability and speeds of CEXs with the permissionless nature of DEXs.

Primary Benefits of Orderly’s Hybrid Approach:

Self Custody — Your Keys, Your Coins

Orderly Network allows users to maintain full ownership of their assets. With sole access to private keys, users have unbridled control over their assets, removing concerns about any withdrawal or insolvency issues popularly associated with CEXs.

CEX-level Performance without CEX Challenges

Our infrastructure allows builders to balance between performance and decentralization. Our matching engine guarantees low latency for high-frequency trading strategies, submitting all trades on-chain to ensure transparency, while users keep custody of their funds.

### Ready-to-Use Liquidity

Liquidity, a pressing concern in many trading platforms, becomes a non-issue with Orderly Network. Thanks to collaborations with multiple top-tier Market Makers, Orderly ensures a constantly flowing orderbook, preventing any liquidity shortfalls.

### Seamless Integration Across Multiple Use-Cases

Builders leveraging Orderly Network can integrate swaps, spot, and perps trading into their projects. Our product suite offers integration to empower a diverse range of dApps and use cases including brokers, aggregators, wallets & custodians, HFT platforms, trading bots, games/dApps, and more.

### Security and Transparency

With Orderly Network, every trade, settlement, and liquidation gets recorded directly on-chain, providing a clear and auditable trail. Users benefit from the assurance that they aren’t simply placing blind trust in the platform. In the unlikely event of any disruptions, all essential data remains safeguarded and accessible on-chain, ensuring unceasing trust and consistency.

Want to build on Orderly? Explore our comprehensive documentation here

Expanding Orderly Network OmniChain

Orderly is on a mission to redefine DeFi and dApps by providing builders with the tools needed to build functional cross-chain projects. Hence, bridging the gap between native chains and the EVM is central to what we aim to achieve. Now, with Orderly Omnichain, builders have the power to create cross-chain dApps and traders can experience seamless trading across various chains — no bridges required. Our commitment to providing unified liquidity, empowering collaborative ecosystems, and delivering CEX-like experiences in DeFi is at the core of everything we do.

With the recent launch of the Orderly Omnichain Testnet, we are expanding our innovative infrastructure to the broader DeFi ecosystem where developers can leverage the strengths and features of different networks, creating a more robust and versatile DeFi ecosystem.

In our upcoming articles, we’ll delve deep into Orderly’s products, revealing how each aligns with our unique hybrid approach. You will dive deeper into the strategy behind our design, and discover our vision for the future of decentralized trading. Stay tuned!

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