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SBF
@SBF_FTX
Replying to
@SBF_FTX
2) The auction you describe is equivalent, basically, to a matching engine: 2 MMs alone will make all those arbs close instantly and pay fees equal to the LP's slippage, the same as a matching engine would economically.
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SBF
@SBF_FTX
3) However, it's _really_ slow. It doesn't just ratelimit arbs--it ratelimits _everything_ if 80% of the network is used on people closing these arbs and everything has a 1m delay waiting to see if someone can arb it.
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SBF
@SBF_FTX
4) The whole point was to get around using a matching engine for performance reasons, but the replacement will probably cost even more. Beyond that, though, how does this increase liquidity? Generally I'd expect inefficiency to reduce liquidity.
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SBF
@SBF_FTX
5) "optimizing for liquidity" sounds great but the truth is that, other than not sucking, exchanges can't do much there--it's mostly liquidity providers. Adding large latency and gas fees, though, will scare off LPs, so I think this just makes that harder.
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SBF
@SBF_FTX
6) Now there are times when having people responsible for something instead of a blockchain is good--e.g. when the blockchain _can't_ do something. But matching engines aren't a great example, because they only require on-chain data.
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SBF
@SBF_FTX
7) None of this is aimed at cross-chain xfers, though. Those are fucking awesome and, because they're cross-chain, there has to be _some_ third party doing something in them. TL;DR: Use orderbooks and matching engines to trade, and cross-chain protocols to settle.
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