What is Flash Trade (闪电交易)?

Understanding Flash Trade (闪电交易) Exploring the Concept and Benefits

Author: Kinetex Network; Translation: Luccy, BlockBeats

Editor’s note: Kinetex Network, a fully decentralized protocol based on Zk proofs, has launched a new generation dApp called Flash Trade. It combines cross-chain interoperability, Zk technology, and clearing systems to simplify the entire exchange process.

This article is sourced from the official blog of Kinetex Network and will be compiled into the Flash Trade article collection by BlockBeats. BlockBeats will continuously update this collection. The following is the translated original article:

Flash Trade is an innovative mode of Kinetex dApp. Let’s take this opportunity to discuss the advantages of this mode and the technologies adopted by the Kinetex team to achieve these advantages.

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With Flash Trade, users can directly exchange cryptographic assets with professional parsers (market makers), greatly simplifying the exchange process. Users only need to select the tokens they want to exchange and enter the desired amount, and the parser will manage the transaction from there. When users agree to the exchange rate, they sign the order, allowing the parser to access their assets. Before executing the order, the parser must provide collateral exceeding the order amount to ensure the security of the user’s assets in case the order fails to execute on time.

Flash Trade was created by the Kinetex team after carefully considering the key challenges faced by the blockchain industry today. While liquidity aggregation models are useful for convenient cross-chain asset transfers, they do not allow for instant transactions. By leveraging native liquidity, Flash Trade guarantees fast execution time, fixed interest rates, enhanced security, and more.

Let’s take a closer look at the most notable advantages of Flash Trade.

Speed

Speed is one of the most outstanding advantages of Flash Trade. The working principle of this mode is to set a time limit for the parser to execute the selected order, usually not exceeding two minutes. Within this time frame, the parser should complete the order; otherwise, the order will be cleared. During the clearing period, the order can be filled by the parser’s collateral or by a liquidator, who receives the parser’s collateral as a reward (more information on the clearing system is provided below). Therefore, users can quickly receive their orders every time. Additionally, the competition between parsers significantly speeds up this process. When they compete with each other, they are incentivized to work faster, thereby reducing the time it takes to complete the order.

Security

MEV Protection

The next advantage consists of several elements: protection against MEV attacks, no need for bridges and third-party validators, and a clearing system. Firstly, MEV (Maximal Extractable Value) is a well-known phenomenon increasingly discussed in the cryptocurrency industry. It refers to the profit validators can obtain by manipulating the transactions they validate and strategically conducting their own transactions.

While it helps attract more validators by providing them with more profit opportunities to help maintain blockchain operations, it may also lead to a deterioration in user experience as they may be subject to severe exploitation each time. To protect users from MEV attacks, the Kinetex team decided to stop using validators and mempools and instead adopt a direct peer-to-peer model. This became possible by using zero-knowledge technology, namely Zk proof. Additionally, third-party validators are often targeted by hackers or pose significant security risks even without MEV. Therefore, running the system without them is a great advantage.

No New Wrapped Tokens

Furthermore, Kinetex allows for a significant advantage in the decision-making for P2P orders: it eliminates the need for creating new Wrapped Tokens. This is important because creating new Wrapped Tokens can lead to issues such as hacking attacks, liquidity freezes, and fragmentation. Unfortunately, the crypto community still occasionally experiences bridging hack attacks, highlighting the main security issues that the industry has yet to solve. Additionally, creating new tokens and locking assets in smart contracts while generating assets on different networks may exacerbate liquidity issues, especially for lesser-known crypto assets. Therefore, by choosing not to create new Wrapped Tokens, Flash Trade prevents security risks associated with bridged cross-chain transfers and helps improve liquidity between different chains.

Liquidation System

Thirdly, a fully decentralized, Zk-based liquidation system is the last crucial part of Flash Trade, enhancing its security. The Kinetex development team has designed this system to be open and public, meaning anyone can be a part of it and support the integrity of the Kinetex system. Liquidators will examine orders and identify expired orders that the resolver failed to fill in time for some reason. Once such an order is found, the liquidator can fill that order, generate a proof of completion, and claim the collateral allocated by the resolver for that order.

With the drive of the liquidator’s collateral, there exists a high level of competition among liquidators, trying to take action as quickly as possible. Consequently, Kinetex ensures that all users can execute transactions quickly and securely.

Discounted Prices and No Slippage

Another undeniable advantage of Flash Trade is its fees. To successfully compete with others, resolvers need to analyze user requests and provide competitive prices for users who are interested. Users can then view different proposals and choose their preferred one. Therefore, all resolvers actively offer the most favorable rates possible to maintain demand.

In addition, since users directly exchange with resolvers after selecting the best conditions, there is no price slippage. Users get exactly what they want without being deprived.

Gas Optimization

The final substantial advantage of the Flash Trade model is gas optimization and a gas-free process. Thanks to the innovative zero-knowledge technology used by Kinetex, transactions can be batch processed together. As a result, the Flash Trade model reduces the number of individual transactions that need to be processed, lowering the overall cost of executing each transaction, eliminating unnecessary gas payments, and saving time.

Furthermore, users do not need to pay gas fees themselves when using Flash Trade because the resolver handles all operations for completing orders, including gas payments. This method creates a gas-free flow, allowing users to avoid storing multiple native tokens in their wallets.

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