CLOB

Central Limit Order Book - Bringing the advantages of CEX to a DEX

VDEX utilizes an orderbook as opposed to an auto-market maker. This has several distinct advantages, including

• Higher capital efficiency

• Protection against MEV

• Better order execution

• Less price impact.

Orderbooks are inarguably better for traders. However, the process for the exchange is not so simple. Ensuring liquidity requires active traders, called market makers, to create resting orders so that market orders can be filled with sub-millisecond finality.

Because of this, VDEX actively encourages traders to submit resting orders (limit orders) into the orderbook. Not only are fees not charged to the trader, but a rebate is given, meaning that VDEX will directly pay users for filling taker orders. These rates range from 0.001% of volume to 0.01% of volume, or between $10 and $100 per $1M volume.

Here's how a trader could earn $100 per day with just a $5,000 account through market making:

The trader submits a 20x leverage bid or asks to fill a $100,000 position size.

That is, $5,000∗20=$100,000

If a trader fills 10 orders per day, likely 5 bids and 5 asks, the trader can reach $1,000,000 daily volume.

So, $100,000∗10=$1M

Since the rebate is 0.01%, the trader makes, $1M∗0.01% = $100

This sustainable profit source does not include the PNL from market-making strategies themselves.

Market makers list bids lower than the current price of an asset and ask higher. This difference is known as the bid-ask price. If a market maker's bid and ask are both filled, they will have purchased an asset from a seller at a lower price than the price at which they sold it to the buyer. This difference is pure profit and ranges from a few cents to a few dollars.

While market making is a relatively safe form of trading, it is not risk-free. Market makers often hold positions as trader sentiment shifts towards buying or selling. If their held assets depreciate before they can find exits, they could be left with realized losses greater than their spreads.

Anyone can become a market maker at VDEX! Users will automatically be paid according to the rate prescribed in the fee schedule. After their first $1M in volume, market makers can earn access to VDEX's APIs for free. Institutional market makers can also apply to the Overdrive campaign for liquidity allocation and higher rebates.