Overview
Asset Management Via Smart Contract
Throughout history, there have been numerous cases of exchanges engaging in fraudulent activities, such as the infamous FTX scandal, which resulted in devastating losses for millions of users. We believe that the first step toward becoming a truly decentralized exchange (DEX) is to make our financial records fully transparent, demonstrating to users that the exchange has not misappropriated any assets.
In reality, most centralized exchanges today tend to misuse user assets for purposes such as asset appreciation or market making. Although Proof of Reserves (PoR) solutions exist, they typically involve periodic audits, and unfortunately, only a handful of auditing firms are genuinely trustworthy. While audits do occur, exchanges can still misappropriate assets during non-audited periods, and most audits are merely symbolic, offering users no truly accessible way to verify whether their assets have been misused. AlphaX, however, takes a different approach by openly revealing our largest treasury to all users, inviting continuous monitoring.
On the AlphaX platform, user assets are managed through on-chain smart contracts, where every transaction can be observed via a blockchain explorer. Moreover, user funds can only be withdrawn from the treasury with explicit user authorization via smart contracts, ensuring that the platform has no opportunity to engage in any malicious activities.
Off-Chain Liquidity & On-Chain Order Settlement
Having proof of on-chain asset security is not sufficient on its own, as it only confirms that user assets are safe. A DEX must also ensure that order settlement is secure without compromising the user experience. Exchanges should not have the ability to manipulate outcomes arbitrarily (e.g., settling a user’s profit of 100 USDT as only 90 USDT).
To maintain a seamless user experience, AlphaX has chosen to employ an off-chain order book matching mechanism with off-chain liquidity at this stage. This approach ensures millisecond-level confirmation during trading, while on-chain liquidity integration provides deep liquidity for most trading pairs, thereby minimizing user slippage.
Although AlphaX utilizes off-chain matching and liquidity, each transaction’s settlement is validated on-chain. This allows users to verify at any time that their orders were executed at the expected price, with transparent verification of profits, losses, and associated fees. This system significantly reduces the possibility of any malicious alterations by the platform.
By combining off-chain liquidity with on-chain order verification, AlphaX ensures that user experience remains intact without sacrificing security.
AlphaX DEX Development Plan
AlphaX's Perspective on DEX Development
In the evolution of decentralized exchanges (DEX), it is essential to strike a balance between user experience and decentralization. Pursuing decentralization as an absolute goal can lead to a compromised user experience. Decentralization is a means to achieve security, not an end in itself. Just as ensuring the safety of children on their way to school is crucial, it would be excessive to convert a school bus into an indestructible tank in the name of ultimate safety.
Therefore, AlphaX's philosophy is that while security remains paramount, we must also maintain a balance with user experience. The user experience should not be treated as a variable that is subject to compromise.
AlphaX DEX: Three Development Stages
1. Stage One: Asset On-Chain Integration
The primary objective is to ensure the security of user assets. All user funds are stored in decentralized smart contracts, where security is guaranteed by the contracts themselves, protecting against hacking and unauthorized use. This stage ensures complete transparency and a 100% reserve ratio.
2. Stage Two: Order On-Chain Integration
By combining on-chain and off-chain processes, order matching, liquidity provision, and liquidation engines are efficiently handled off-chain, while price oracle, funding cost settlements, and post-match fund settlements are conducted on-chain. This approach ensures transparency and immutability, preventing any possibility of fraud.
3. Stage Three: On-Chain Trading Engine and Liquidity
On-chain trading engine and liquidity for ultimate security. Currently, there are no mainstream, mature solutions in the industry that can balance security with user experience. AlphaX will continue to explore and seek the optimal technological approach, whether through developing an application-specific blockchain or incorporating AMM mechanisms, establishing AX as a pioneer in the industry.
We have successfully completed the development of Stage One and are now preparing to transition into Stage Two.