How does this benefit users?
reduction of gas costs + their inclusion in the exchange rate, allowing gasless swaps
limit orders
possibility of selling at a lower price or buying at a higher price than the market price to force the execution of the order
possibility of buying lower or selling higher if the user has no time constraints
MEV protection + privacy – transactions are not included in the mempool before settlement
How does this benefit fillers/resolvers?
create arbitrage opportunities due to orders executed at a price different from the market price
access to reduced-cost liquidity for fillers (especially those who already have inventory)
higher potential arbitrage profit
example: ETH market price $1000
an arbitrageur wants to buy $1m in ETH at $1030 (3% price impact) to sell at $1050 (2% profit) against a 1% price gap if he fills a sell order for $1m at $1010 (4% profit)
how can we guarantee that orders will be fulfilled?
Uniswap X: lower arbitrage cost via Uniswap X than AMMs
lower gas costs to fulfill an order than to buy or sell a token via AMM
the arbitrage opportunity increases with each block due to the order decay function
ability to sell at a lower price or buy at a higher price than the market price, thereby increasing the potential arbitrage profit
1 inch Fusion: same
how to incentivize fillers to offer the best price?
Uniswap X: existing profitable arbitrage
1inch Fusion: existing profitable arbitrage
How to encourage fillers to offer the best price at the start of the auction?
Uniswap X: quote request system. Exclusive to fill the order before the start of the auction. The filler is preselected by the swapper. Status obtainable by winning many auctions or by reputation (being a famous market maker). This helps guarantee an arbitrage profit without auctions.
1inch Fusion: I don’t see any, main difference between the two.
this could create execution gaps of up to 6 minutes between Uniswap X and 1inch Fusion
this could have a serious impact on user experience
How can we discourage bad behavior from fillers?
Uniswap X: loss translated into gas fees if the reactor contract doesn’t settle the order due to unmet conditions
this repeated behavior will be disabling in the rfq system
1inch Fusion: gas costs / high barriers to entry as only the top 10 resolvers (1INCH stake) are whitelisted via KYC
Who goes deeper?
Uniswap wins here as it plans to launch a optimistic cross chain protocol. It would allow cross-chain swaps through dutch auctions.
The main difference is that the order’s filler must submit a bond to claim the order and then fill it on the destination chain. To ensure honest behavior, the filler can be challenged by anybody after he filled an order. He must provide a proof to win the challenge during the challenge period. This proof can be retrieved from the settlement oracle. If there is no challenge, the order is executed and the funds are forwarded to the filler.
This model could enable very fast bridging with the same price impact and cheaper cross chain arbitrage. Users are exposed to less bridge risk as this design doesn’t necessarily involve bridging. The user’s assets remain on the same chain during the transaction. Only the order’s filler will bridge user’s assets if they need them to the destination chain after the transaction.