December 26, 2019

IDEX’s Alex Wearn: Scaling A Decentralized Exchange Through Optimized Optimistic Rollups

28 minutes

Host Tom Shaughnessy of Delphi Digital is joined by Alex Wearn, the co-founder and CEO of IDEX, a decentralized exchange built on Ethereum, to discuss the next version of the exchange and using optimized optimistic rollups to scale the exchange.

Key Points

IDEX tries to combine the design of a centralized exchange and the security of a decentralized exchange.

The “optimized optimistic rollup” takes the most scalable aspects of different transaction settlement methods.

There is a huge potential to bring other applications into the IDEX network to use the O2 rollup design.

Topics Discussed

IDEX 2.0 - UI improvements (faster and more performant) and a more efficient settlement process with rollups instead of settling each transaction one by one (IDEX users paid $5M in gas fees in 2018).

IDEX differs from competitors (Uniswap etc) by having a high performant order book. An on-chain order book is great for integrations, but hard to use when replicating complex trading strategies.

In competing with 0x, IDEX disagrees that trying to have a high performant order book may be too difficult if its decentralized.

How the different types of rollups work to drive scale for Ethereum, and the differences from normal rollups to IDEX's version called optimized optimistic rollups.

Optimized Optimistic rollups can drive much higher throughput vs using traditional rollups.

How IDEX grew to been the most successful DEX and dapp to date, with over 300k users executing five million trades worth over $2 billion.

The use of optimized optimistic rollups beyond IDEX, such as in gaming.

Alex's thoughts on the battle between centralized exchanges (Coinbase, Binance, Bitmex, Delta) vs Decentralized exchanges (IDEX, Uniswap, 0x, etc).

Episode Highlights:

IDEX aims to build a highly performant, yet safe and secure decentralized exchange; they want to create a centralized experience on a decentralized platform.

Improvements in IDEX 2.0 include overall performance improvements from UX and UI developments over the past few years, and back-end improvements to how transactions are settled.

The Merkle root takes data off-chain, hashes it together into a single data point, which is then submitted on-chain.

IDEX is looking at different design proposals including Zero-Knowledge Proofs and the Optimistic rollup.

They could not run IDEX on Optimistic rollups because their transactions were too complex to see a substantial increase in their transaction throughput.

IDEX’s data is only ever published to an off-chain ledger.

They have validators who work to verify that the transactions published off-chain hash up to the same Merkle root that is published on-chain.

O2 rollups are scalable to eventually be available to other applications, but IDEX doesn’t see this as a way to monetize but as a way to give back to the community.

Alex believes customers care more about application performance and fund security than they do about anonymity.

The O2 rollup demo is currently live and can be tested, and they aim to make it fully live during Q1 of 2020.

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