Building An Ecosystem on Top
Settlement of Aori's limit orders happens on-chain through an execution contract. Any token can be permissionlessly traded through Aori in a non-custodial fashion, giving protocol designers and builders the capabilities to leverage Aori as their liquidity layer to build on top of in a seamless manner. Price pre-confirmations offer them an overwhelmingly improved experience when trading on-chain and easier risk management.
Provided is a non-exhaustive list of examples of protocols that can be built and some that are being built by the Aori team or by others:
Aori Market Making Vaults
- Traditional market making models can be applied to a limit order book design like Aori’s, allowing for funds or protocols to build ERC4626 vaults that enable retail users to LP into an array of market making strategies
Exchange for Derivatives
- Any financial derivative that can be tokenized can be offered natively through Aori. ERC20s, ERC721s, and ERC1155s are currently supported, providing immediate integration for projects to offer derivatives through.
- They are given full liberties to price, without having to deal with the complexities of pricing with an appropriate AMM convexity curve.
Decentralized Token Market Making
- On-chain alt-coin market making is possible as well via professional market makers in Aori via decentralized lending markets. Token holders can lend their assets via an ERC4626 vault that either:
- Run automated market making strategies far more complicated and risk-averse than standard x*y=k models
- Lends tokens to a professional market maker that employs a proprietary strategy
MEV Capture Vaults
- Pure arbitrage vaults similar to that of Yearn Finance can stake to earn base yields on underlying lending protocols while redeeming intra-block to execute profitable MEV arbitrages across AMMs, retaining both the base yield and arbitrage profits to the vault. The footprint of trades performed will be visible, given that Aori can operate on the same base chain as the vault.
- Liquidations on lending or derivatives protocols as well can be executed against using Aori liquidity as a source of capital for fulfillment.
- This idea can be expanded to vaults for funding statistical arbitrage strategies, but it could carry more centralization risk by the portfolio manager.
Execution Management Systems
- Many hedge funds, systematic traders and retail users have difficulty building the systems to execute efficiently on-chain. Not knowing the execution price that one executes at until the end of a block auction (slippage) adds additional uncertainty.
- An institutional-oriented execution system like Eulith, Dexible or Vektor could be built on top of Aori to offer pre-confirmations to these large market participants.
- Retail-focused applications including Telegram bots like Maestro and Unibot could utilize pricing off Aori to provide their users with more certainty with the price the trade is done at.