Optim Finance
  • INTRODUCTION
    • Introduction
    • Roadmap
  • OADA
    • Overview
    • OADA 🟣 and sOADA 🟢
    • Flow of Funds
    • User Guides
      • Passive yield with sOADA
      • Epoch Stake Auction
    • AMOs
      • Splash DEX AMO
      • Stake Auction AMO
      • Staking AMO
    • UNHCR Donation Module
      • Automated Yield Donation Protocol
      • NFT Impact Certificate
      • Integration with the OADA Ecosystem
      • Humanitarian Partnership
      • Future Extensions
    • Governance
    • Resources
  • OTOKEN Framework
    • Introduction
      • Key Benefits
      • Who is it for?
      • Inspirations & Applications
    • Framework
      • Key Concepts
      • Use Cases
      • OTOKENs
    • Core Concepts
      • OTOKEN and sOTOKEN
      • Algorithmic Market Operations (AMOs)
      • Balancing Stability, Yield, and Adaptability
    • System Architecture
      • OTOKEN Policy
      • Staking AMO
      • Collateral Management AMO
    • Extensions & Other Modules
      • DEX AMO (Liquidity & Peg Stability)
      • Stake Auction AMO
      • Borrowing & Lending AMOs
      • Other AMOs & Opportunities
    • Multiple OTOKEN Deployments
      • Ecosystem Synergy
      • Not Just Synthetic Assets
    • Vision
      • Key Pillars of the OToken Framework
      • Future Directions & Opportunities
      • An Invitation to Innovate
    • Bug Bounty Program
  • LIQUIDITY BONDS
    • Overview
    • Bond App FAQ
    • Use Cases
      • ISPO Bonds
      • SPO Bonds
    • Bond Architecture
      • Validators
      • High Level Workflow
      • Scripts Technical
      • Transaction Flow
      • Pooled Loans
    • Guides for SPOs
      • Bond Creation
      • Bond Sales
      • SPO Bond Issue Summary
      • Bond Verification
    • Liquidity Bonds Audit
  • OUSD
    • OUSD Reserves
      • Reserve Criteria
        • Stability and Reputation
        • Compliance
        • Smart Contract Security
    • Ongoing Reserves Management
      • Reserve Asset Valuation Calculation
      • Dynamic Reserve Asset Adjustment Metrics
        • Dynamic Reserves Adjustment
    • Yield, Staking, and Flow of Funds
      • Yield Modules
        • OUSD DEX AMO
        • Future Modules (v2)
      • Staking AMO
      • sOUSD Redemption Mechanism
    • Peg Protection
      • Market Depth and Liquidity
    • Governance and Risk Framework
      • Risk Capital Requirements
      • First-Loss Capital Structure
      • Asset Allocation Framework
        • Static Governance Parameters
        • Dynamic Allocation System
    • Financial Engineering Audit
  • Leviathan
    • System Architecture
      • Background
      • Concurrency Limitations
      • Complexity in Transaction and Contract Management
    • Core Concepts
      • Deterministic Transaction
        • Guaranteed Transaction
      • Instant Finality
        • Liveness and Safety
        • Probabilistic Finality vs Instant Finality
      • Account Abstraction
        • Concept of Account Abstraction
        • Technical Implementation
        • Security and Operational Implications
      • Intent Based Transactions
        • The Infrastructure and Process of IBTs
        • Declarative Constraints in IBTs
      • Layer 2
        • Types of Layer 2 Solutions
      • Sequencers
        • Core Functions of Sequencers
        • Role in Layer 2 Rollups
        • Challenges
    • System Components
      • Understanding the System Components
      • Optim-Account (Intents to enable tx chain)
        • User Interaction and Intent Submission
        • Intent Structuring and Authentication
        • Smart Contract Functionalities and Operational Parameters
        • The Necessity of an Account-Based Framework
        • Account Abstraction and Its Role in Leviathan
      • Leviathan Sequencer System (tx chain building)
        • The Role of the Leviathan Sequencer System in Conjunction with The Optim Account
        • Sequencing and Ordering of Transactions
        • The Role of Time in the System
        • The Pragmatic Leviathan: Dealing with Potential Changes
      • The Role of OADA in the Leviathan System
        • Operational Simplification of Staking Mechanisms via OADA Integration
        • Facilitating Time Dilation and Composability
    • Processes
      • Entering Leviathan
      • Transaction Execution
      • Leaving Leviathan
    • High Level Overview
      • System Design
        • Account Abstraction Functionality
        • Guaranteed Transactions
        • Instant Finality
        • Unbreakable Transaction Chaining
        • Layer 2 Execution Environment
        • Future Sequencer Network
      • System Context
        • Limitations of current transactions chaining paradigm
        • Limitations of current inter dApp composability issues
        • Explanation of basic design and non-custodial asset inputs
        • Intent Based Transactions
        • Account Base vs eUTxO model app architecture
      • Theoretical Applications
  • GOVERNANCE
    • Governance Overview
      • Proposal Temp Check
      • Governance Proposal
        • On/Off Chain Mechanics
      • ODAO
    • Tokenomics
      • Categories
      • Vesting
    • Optim DAO Wallets
    • Protocol Profits
  • GUIDES
    • Transaction Chaining
      • Background
      • Overview
      • Pool Transaction Chaining
    • OPTIMiz Conversion
  • ODAO Stack
    • Introduction
    • Design Principles
    • Why Optim DAO Stack?
      • Current Limitations
      • ODAO Solutions
    • Key Features
      • Snapshot Voting
      • Treasury Management
      • Proposal Execution
    • System Architecture
      • Modular Framework
      • On-Chain Logic
      • Off-Chain Operations
      • User Interfaces
    • Core Modules
      • Snapshot Voting Module
      • Treasury Management Module
      • Proposal Execution Module
    • Future Roadmap
      • Potential Future Enhancements
      • Long Term Vision
  • OADA UI
    • Setup
      • Installation
      • Development Workflow
      • Troubleshooting
      • Development Tips
      • Open Source Contributions
      • FAQ
    • Key Functionalities
      • Wallet Integration
      • Dashboard
      • Transaction Management
        • UTxO Management
        • Transaction Creation and Conversion
        • Transaction Monitoring
      • Real-time Updates
        • Portfolio Value Tracking
        • Transaction Status Monitoring
    • OADA Smart Contract API
      • Minting OADA
      • Staking OADA
      • Unstaking sOADA
      • Epoch Stake Auction
        • Bid Calculation Functions
        • Auction Actions
        • Bid Form Component
        • Auction Dashboard
    • Tutorials
      • Environment Setup and Installation
      • Understanding the Project Structure
      • Basic Configuration and Customization
      • Working with Components
      • State Management and Data Flow
      • Wallet Integration and State Management
      • Smart Contract Integration
      • Advanced UI Customization
      • Testing and Quality Assurance
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  1. GUIDES
  2. Transaction Chaining

Background

As you might already know, the Cardano blockchain is based on the eUTXO model. This means that, unlike account-based blockchains such as Ethereum, there’s no shared global state, and all transactions occur in parallel to each other (concurrently). While this design choice brings a wide array of benefits, such as determinism, lower transaction fees and less MEV/front-running, it has also brought its fair share of difficulties to dApps that need access to a global state (such as DEXs).

As such, Cardano DEXs like Minswap or Sundaeswap have resorted to “batching” — a solution where one or a series of off-chain sequencers are in charge of aggregating (or batching) a number of UTXOs, before they are submitted on chain and executed. This off-chain batching model presents a series of outsized problems for a DeFi dApp, namely:

  • Centralization: this batching model means that batchers can decide to stop processing orders and can stop the trading or the adding/withdrawing of liquidity on the DeFi dApp at any time, which is antithetical to the spirit of decentralization.

  • Custodiality: related to the former, since batchers can stop the withdrawal of liquidity, this also means they have control over your funds (whether or not to let you withdraw it) once you have provided them to the DeFi protocol.

  • Batcher Extractable Value (BEV): batchers can constantly sandwich attack users because they can reorder the transactions freely. They can extract BEV for free, and with no repercussions (as batchers have no competition).

For example, let’s say an order comes in to buy 1,000 $ADA of Token A with 1% slippage set, meaning it turns into a limit order for buying 990 $ADA of Token A. A batcher could use this to profit themselves by buying Token A on the market such that the price moves and the order gets executed to buy 990 $ADA of Token A. Then, after the user has bought at a markup, the batcher could sell Token A for a profit. So the batcher would buy first, move the price up, execute the order, and then sell for a profit.

In essence, the eUTXO is a novel model with plenty of advantages and caveats. While some simple solutions have been designed to deal with some of its pain points (such as concurrency) it is high time new solutions were created that allow the entire Cardano DeFi space to move forward to a more optimal, fair and decentralized state. That is precisely the aim of Transaction Chaining.

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Last updated 2 years ago