What are off-chain order book DEXs?

A guide on off-chain order book DEXs, an alternative to AMMs


Apr 22, 2021
Edward Wilson

Quick summary

Off-Chain Order Books are becoming more popular as a form of decentralized exchange (DEX). Users trade on peer-to-peer order books with the trading activity occurring outside of the blockchain to reduce gas costs and increase speeds. Only trade settlement happens on-chain. This article will explain how off-chain order book DEXs work.

What is an off-chain order book DEX?

An off-chain order book DEX enables trading by combining order books built off a blockchain with on-chain settlement. The aim is to allow traders to enjoy both the benefits of decentralized and traditional trading.

An off-chain DEX uses a peer-to-peer order book to execute trades. Order books contain information about the trading activity such as the price, volume, expiry date and whether the order is a buy or sell. When someone else sees your order on the order book, they can submit an order to the DEX, and the smart contract will check if the funds are available for the trade. If everything is acceptable, then the trade is made.

An image showing an off chain order book dex

How do off-chain order book DEXs work?

Rather than using the main blockchain to validate each transaction, an off-chain solution can offload some of the trading activity to reduce costs and increase speeds. That is possible as the trading activity happens elsewhere with trade settlement occurring on-chain. 

It will require some trust in the platform that will process the orders. But, off-chain order book DEXs make for a faster experience, reduces gas spend while also allowing you to custody your funds. 

Three examples of off-chain order book DEXs are dYdX, IDEX and 0x

How can you use an off-chain order book DEX with Argent?

With an Argent wallet, you can connect to any off-chain order book DEX that is compatible with WalletConnect to deposit and withdraw funds. As trading occurs on the off-chain order book DEX platform, you will also need a device that will let you do this, such as a laptop or computer.  

When depositing and withdrawing funds between the off-chain order book DEX and Argent, you will need to pay gas. (See our guide to what gas is here).  

Further resources

Scaling DeFi with dYdX and StarkWare by Bankless

How to use dYdX with Messari

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