Abstract: We introduce Nagaswap Protocol, a collision and front-running resistant decentralized exchange protocol on Binance Smart Chain that integrates verifiable delay functions (VDF) as a proof-of-elapsed-time to resolve same-block order conflicts while preventing front-running attacks. Our proposal is the only decentralized exchange protocol that is fully trustless, publicly verifiable, resolvable, liquidity neutral, and front-running resistant.
This is the summer of DeFi. We’ve seen the release and growth of hundreds of projects in the space, which together have created a more powerful DeFi network; clean, intuitive interfaces; and an explosion in locked value. We’ve also seen the introduction of several new, novel projects.
But the novel and well-designed aren’t the same things, and many of the underlying weaknesses of DeFi remain.
1.1. Speed and Usability
Above all else, DeFi is slow and expensive. It costs dollars to do a trade, and minutes for it to clear. This is fine for some use cases-but many customers prefer the fast, cheap execution of centralized exchanges. It’s hard to stare at your Metamask wallet waiting for a trade to be confirmed without missing centralized exchanges.
When you trace all the way through, most DeFi protocols bottom out in a centralized oracle-often in the most crucial step.
Sometimes, this is a liquidation price oracle pointing to centralized exchange APIs. Other times it’s a council of token holders. Sometimes it’s the team of the protocol itself.
There’s a further problem too — most decentralizing protocols are computationally intensive. Fitting them into the ETH blockchain in a way that is cost-efficient and fast has mostly eluded the space.
That’s not to say that centralization is always bad! USDT, USDC, and similar tokens are great projects which have revolutionized the entire crypto industry. They power much of the volume, and if you want something that can be turned into a dollar 24/7 that’s the only game in town and probably always will be. Because fundamentally dollar bills aren’t on the blockchain, they’re in bank accounts.
But if what you want is pure DeFi, the options are few and far between.
Uniswap has quietly revolutionized DeFi by allowing trading without order books.
But the more remarkable thing is that Automated Market Making is necessary. AMM is a system where there are no limit orders, or even bids or offers; in an order book, you can decide the price, size, and direction you want to trade.
There are lots of disadvantages to AMM. You can’t provide liquidity unless you provide both sides; you can’t choose to only provide at a particular price; you can’t provide at a price other than the current market price, and you can’t select the size to provide there without providing way more behind it.
There’s a solution to this–it’s what the rest of finance does. But DeFi
doesn’t have order books, by and large, because the ETH network is too slow and expensive to support them. Matching bids and offers with each other involve a bunch of operations.
1.4. Cross-chain Support
There have been many attempts at cross-chain support. WBTC is probably the most known, creating an ERC20 token wrapping BTC; Thorchain is building an entire protocol that allows for complete, fast cross-chain support.
There are lots of ways to attempt it. One thing all of the current versions have in common, though, is an oracle, or panel of token holders, or some other place where the truth is decided by people expected to be honest. Because, fundamentally, BTC isn’t on Ethereum, so how can a smart contract know or impact its transfers?
Enter Nagaswap Protocol.
Nagaswap is not perfect; nothing is. There are fundamental tradeoffs between speed and decentralization; sophistication and ease of use.
But Nagaswap is different, and it’s powerful. Its software enables a fast DEX; it has cross-chain support, stable coins, wrapped coins, order books, and the ability to create custom and novel financial products; and while having all of those, it’s fully decentralized. There are no oracles to centralized price feeds; no tribunals whose honesty you rely on. Nagaswap is pure DeFi. And unlike current DeFi, it’s fast and cheap.
2. Project Nagaswap Protocol
Project Nagaswap will unveil a fully functional decentralized exchange with trustless cross-chain trading, all at the speed and price that customers want. And despite living natively on Binance Smart Chain, it will be interoperable with Ethereum. Nagaswap made of seven main ingredients:
· BNW: The Nagaswap token is the utility token of the Nagaswap ecosystem.
§ BNW will be fully integrated into Nagaswap, and also benefit from a buy/burn of fees
· Cross-Chain Swaps: trustlessly exchange assets between chains
§ This is in contrast to most current protocols that rely on trust parties to administer the swap
· Orderbook: a decentralized automated full limit order book
§ This will give traders complete control over their orders, unlike Automated Market Making.
§ Orderbook and matching is fully automated on-chain, and orders are from Nagaswap end users.
· Full Ethereum and Binance Smart Chain integration
§ This will make Nagaswap fast and efficient–all while being interoperable with the Ethereum ecosystem and ERC20 tokens
· Physically settled cross-chain contracts
§ These will allow easy margin positions in DeFi on synthetic assets
· NagaBTC: a model for creating an ERC20 or Nagaswap tokenization of BTC
§ This would be a fully trustless BTC token
· NagaUSD: a model for creating a decentralized stable coin
§ This would be a decentralized stable coin that does not have a single point of failure