Batch auctions are a trading mechanism in which individual orders are grouped together and executed simultaneously.
Batch auctions are a trading mechanism in which individual orders are grouped together and executed simultaneously. All orders within a batch are settled at the same uniform clearing price. Batch auctions benefit from aggregated liquidity and are a popular mechanism for ensuring fair price discovery in both the decentralized and traditional finance worlds.
In the context of blockchains, batch auctions play an important role for initial token offerings, liquidations or buybacks of illiquid assets and as a means to prevent MEV. Batch auctions are fundamentally less vulnerable to MEV since the ordering of trades within a batch doesn’t have an effect on the price.
While traditionally batch auctions operate on a single token pair (like order books), a special case — referred to as multi-dimensional batch auction — allows for orders between multiple token pairs to be settled in the same batch. This is particularly beneficial for fragmented token spaced (e.g. USD-stablecoins) or less liquid token paris (e.g. certain insurance or prediction market outcome token) as trades don’t have to happen between direct counterparties, but can also happen in rings:
Felix joined the Ethereum ecosystem full-time in 2018 after having worked on encrypted messaging infrastructure at Facebook for 3 years. He is currently the engineering team lead for Gnosis Protocol — the decentralized trading protocol of Gnosis, which builds new market mechanisms for decentralized finance.
© 2021 COINCU Financial Group Inc. Address: Road Town, Tortola, British Virgin Islands (BVI).
Email us: [email protected]