Background

Bitcoin (BTC) has built a decentralized currency paradigm, producing a completely new decentralized currency network that is being used by an increasing number of countries and people. Ethereum (Eth) has established a decentralized asset paradigm: ERC20 enables the development of on-chain applications such as DeFi, while ERC721 enables the capitaliza- tion and globalization of digital collections such as NFT, resulting in the formation of a brand new decentralized asset.

Issues of On-chain Trading

However, in terms of trading, the on-chain and off-chain worlds are essentially the same, with both continuing the Pareto trading paradigm of matching, which is the market trading mechanism that everyone refers to. This mechanism necessitates clear buyers and sellers, and transaction execution is legally protected. Smart contracts have replaced the role of the law’s protector on the blockchain, lowering transaction trust risk. On- chain transactions are a novel concept that many people are excited about. However, there are additional issues in the on-chain matching, such as high cancellation costs, poor liquidity, a terminology meaning block generating delays, and so on.

To address these issues, Uniswap proposed the AMM (Auto Market Maker) mechanism, which provides buyers with a certain amount of liq- uidity by restricting seller behavior. However, arbitrage is easy due to lim- ited price feedback, and a significant volume of TVL (Total Value Locked) brings waste of resources. This, in our opinion, is not the best solution for on-chain tradings.

A New Trading Paradigm Introduced by NEST

We propose a completely new trading paradigm based on current blockchain technology, martingale trading, as well as its corresponding decentralized trading network - martingale network. This new trading paradigm makes good use of the blockchain’s technical characteristics of first confirming the existence of assets and then the ownership relationship, and it provides traders with unlimited liquidity through risk sharing. This revolutionary new trading paradigm is truly applicable to the world of on-chain trades.