Dubai, UAE, 27th November 2023, Kinetex’s latest innovation, Flash Trade, will provide a highly efficient and secure environment for trading cross-chain. The Flash Trade protocol depends on four participants: resolver, worker, liquidator, and user, where resolvers and liquidators work together to ensure the guaranteed execution of all user orders.
While liquidators focus on expired orders, resolvers help to maintain the smooth swap experience. They are responsible for various critical tasks, such as setting swap rates, finding liquidity to complete orders, making gas payments, etc.
Resolvers are expected to be professional market makers with a deep understanding of the market who can analyze it, predict possible trends and adapt to them, develop effective trading strategies, and manage their own collateral. Additionally, they must be skilled enough to supply and maintain adequate liquidity, rebalance assets if needed, and have a comprehensive risk management plan to succeed in this role and make a profit. Therefore, this role is challenging and unsuitable for beginners.
Resolvers & Swap Process
The swap process involves four steps that resolvers need to follow. The first step is depositing collateral, which is necessary to protect users’ funds during swaps. Upon receiving a resolver’s deposit, CollateralManager updates its records, including the total collateral amount it currently holds and the amount of unlocked collateral. Each time a new deposit is made, the CollateralManager updates its records. If the resolver fails to process a transaction correctly, the collateral deposit ensures the order’s execution by liquidators (read more about liquidators in this post). Note that resolvers have a maximum 2-minute window to finalize each order.
The second step is order filling. Firstly, resolvers provide rates for user requests, competing to offer better deals. If the user agrees to a rate and there is enough collateral, a resolver can confirm the order. If the collateral is insufficient, it will not be able to proceed. After successfully confirming the order and receiving the order asset in the initial blockchain, the resolver fills the order in the destination blockchain. Since resolvers complete orders, they are responsible for paying gas fees on their part, maintaining a gasless flow for users.
The third step is unlocking collateral after the successful order filling. The resolver confirms that the order has been appropriately filled with the CollateralManager, and the latter checks if it is accurate or reverts the transaction otherwise. If everything is in order, the CollateralManager adds the collateral amount locked for this order back to the rest of the resolver’s collateral.
The last possible step is collateral withdrawal. The resolver can request it back if needed for any reason. The CollateralManager checks to ensure the amount being withdrawn does not exceed the amount of locked collateral still used for filling ongoing orders. If it does not, the resolver receives its collateral back; if it does, the withdrawal is rejected.
Collateral & Liquidation
As mentioned above, collateral helps ensure user funds’ security and the trouble-free swap experience. It motivates resolvers to fill orders promptly and also keeps away individuals with malicious intent. However, there is still a chance of something going wrong. This is where liquidation comes into play.
Liquidation is another process essential for the security of the Kinetex ecosystem. It allows unfilled orders to be completed and users to receive the assets they want, even if resolvers cannot complete orders for some reason. If an order reaches its timeout and expires uncompleted, liquidators (another of the Flash Trade protocol participants) can fill it instead. They transfer users their desired assets and can claim collateral allocated for those orders by resolvers in return.
Such an approach creates a resilient model that enhances the system’s security, where everyone is motivated to perform their duties to the best of their abilities.
Smart bots will be one of the features that resolvers will be able to use to streamline and improve their trading experience in Flash Trade. Resolvers will be able to create unique trading strategies, helping to maximize profits from the resolving process. By doing so, they will be able to support the Flash Trade’s operation, provide users with the most beneficial rates and fastest execution times, and take advantage of available profit opportunities.
Kinetex’s latest innovation, Flash Trade, provides a highly secure and efficient environment for crypto swapping, and resolvers play a vital role in the process. They take all responsibility for executing swaps, including providing rates, finding liquidity, ensuring gasless flow, etc. Through collateral, resolvers are motivated to complete orders diligently and quickly, freeing users from worrying about delays or technical issues and allowing them to focus on the various possibilities offered by the DeFi industry instead. By doing so, Kinetex offers a new approach to handling swaps, which is more reliable, secure, and efficient.
Disclaimer: The views, suggestions, and opinions expressed here are the sole responsibility of the experts. No The Money Circles journalist was involved in the writing and production of this article.