DFBA trading mechanism: A new solution to the challenges of CLOBs on the Blockchain.

On August 23, a research team from a market-making firm published a paper proposing a new trading mechanism called Dual Flow Batch Auction (DFBA), which aims to address the challenges of traditional continuous limit order books (CLOBs) on the Blockchain.

It is reported that CLOBs rely on continuous matching and time priority mechanisms, leading to delayed arbitrage, MEV (Miner Extractable Value) issues, and adverse trading liquidity, increasing market trading costs.

DFBA conducts two independent auctions every 100 milliseconds, dividing orders into Maker and Taker groups, and completing transactions at a single fair clearing price. This mechanism eliminates time priority, avoids competition among liquidity providers, and shifts the focus of competition from speed to price and scale.

Compared to traditional designs, DFBA can offer tighter quotes and deeper liquidity while protecting natural traders from the impacts of delayed arbitrage and MEV reordering. The research team believes that this design inherits the advantages of previous trading models, such as continuous liquidity and auction fairness, while avoiding drawbacks like high slippage and liquidity fragmentation, thereby providing a more fair and efficient trading environment for market participants.