Unizen Liquidity Distribution Mechanism (ULDM)
Minimizing Slippage in Decentralized Trading
Last updated
Minimizing Slippage in Decentralized Trading
Last updated
Introduction The Unizen Trade Engine is a decentralized platform that enables users to trade digital assets across multiple blockchains and decentralized exchanges (DEXs) without worrying about the complexities of different protocols and platforms. One of the platform's key features is the Unizen Distributed Liquidity Mechanism (ULDM), a unique liquidity aggregation and routing system designed to minimize slippage in decentralized trading.
In decentralized trading, slippage is a pervasive issue due to the fragmented liquidity across multiple decentralized exchanges (DEXs). When a trader places an order on a DEX, the price of the asset can fluctuate due to market movements or the impact of the trade itself. This results in slippage, where the final execution price deviates from the expected price.
Unizen addresses slippage through its advanced Unizen Liquidity Distribution Mechanism (ULDM). ULDM is a sophisticated system that integrates Smart Liquidity Routing and a custom trade splitting algorithm to optimize trade execution across fragmented liquidity pools.
Smart Liquidity Routing
Smart Liquidity Routing is a dynamic mechanism that scans multiple DEXs to identify the best available liquidity. The routing algorithm considers factors such as liquidity depth, price impact, and transaction costs to determine the optimal path for trade execution. This ensures that trades are executed at the most favorable price by leveraging the optimal liquidity sources.
Trade Splitting Algorithm
The trade splitting algorithm minimizes slippage by dividing larger orders into smaller fragments, which are then executed concurrently across multiple DEXs. Advanced statistical models are used to determine the optimal split strategy, minimizing the price impact of each fragment. This parallel execution ensures that large trades do not significantly affect the market price.
A recent enhancement to ULDM is the integration of Private Market Maker (PMM) liquidity. This integration allows Unizen to interface with multiple MM orderbooks and settle transactions on-chain. By incorporating PMM liquidity, ULDM can now simultaneously split and route trades across both private MM orderbooks and AMM liquidity pools, significantly improving trade outcomes, especially for deep liquidity pairs like ETH and USDT.
Unizen's ULDM is a robust solution addressing slippage in decentralized trading. By combining Smart Liquidity Routing, a custom trade splitting algorithm, and PMM liquidity integration, ULDM enhances trading efficiency and execution precision. This advanced mechanism ensures that trades are executed at the best possible price while minimizing slippage, providing a superior trading experience across multiple blockchains and DEXs.
