What is a crossing network?

While most crypto exchanges can be categorized as either automated market makers (AMMs) or centralized limit order books (CLOBs), Renegade is a unique type of decentralized exchange known as a “crossing network.”

Crossing networks are a new primitive in DeFi that allows traders to swap liquidity peer-to-peer at an optimal price without price impact, spread, or the threat of MEV. In traditional finance, crossing networks are the foundation of dark pools.

How crossing networks work

Rather than matching bids and asks like order books, or taking liquidity out of a liquidity pool like AMMs, crossing networks rely on peer-to-peer liquidity to facilitate trades.

AMM vs Order Book.png

In a crossing network, open orders look for liquidity from other orders trading in the opposite direction. For example, a trader looking to sell USDC and buy ETH on a crossing network would find counterflow in another trader looking to sell ETH and buy USDC.

This means that orders wait on the order book until there is sufficient counterflow to fill their order. Small orders fill instantly while large orders may take a while as they absorb liquidity in bits. An important aspect of most crossing networks is that they do not do proprietary price discovery. Instead, they derive prices from liquid “lit” order book venues such as Binance and trade at the midpoint of the bid-ask spread, which is the best possible price.

Conceptualized differently, crossing networks trade time-of-execution for quality-of-execution. Users are guaranteed to trade at the best price, but there must be sufficient counter-flow to facilitate the trade.

Benefits of crossing networks

As a new primitive in DeFi, crossing networks are quite compelling:

  • Best prices: Crossing networks trade at some predetermined price such as the midpoint between the bid and the ask spread of a liquid public venue. Regardless of when a trade executes, users are guaranteed to get this price, so they don’t have to worry about stale prices.
  • No price impact or spread: On traditional trading venues like orderbooks and AMMs, large trades move the price significantly as they use up liquidity. Since crossing networks match liquidity peer-to-peer, price impact and spread are not a factor. Instead, if an order does not have enough counterflow to fill immediately, it fills up over time as more orders open.
  • No MEV: MEV comes from stale prices and transaction reordering in the mempool. Thanks to their peer-to-peer nature, crossing networks find perfect counterparties each time, enabling fully decentralized on-chain trading with zero MEV.

Renegade: DeFi’s first crossing network

As the first on-chain dark pool, Renegade matches trades through a crossing network while keeping order details entirely private.

Thanks to the platform’s ZK-MPC architecture, orders that enter the crossing network are totally invisible to other traders until they find a liquidity match. Even after a trade occurs, counterparties only know what asset they swapped, they do not know the full size of each other’s orders.