vVv AMA | Orderly
Orderly Network: Web3’s TradFi, a Multi-Chain Modularized Orderbook Infrastructure Protocol
October 31, 2022
Orderly Network is a permissionless decentralized infrastructure layer with modularized orderbooks built on NEAR Protocol with a multi-chain goal. It uses an on-chain orderbook to provide a platform with a risk engine, matching engine, and shared asset pools for dApps to build on. They will allow for financial instruments such as spot trading, margin, perpetual futures. swap functionality, lending, borrowing, asset bridging, options, and more. And, with the help of their incubators, WOO network and NEAR, they can leverage the knowledge and experience of both teams to achieve their grand vision.
Ran Yi Co-founder of Orderly Network, joined us for an AMA on October 26th.
vVv: Can you give us a quick overview of the Orderly Network, the different aspects of the project, what you guys are building, and what is your technology?
Ran: Orderly Network will be the next-generation protocol on which the future DeFi dApps will be built. Our thesis is that DeFi will be bigger in the future than CeFi. As evident in the latest CeFi crisis starting with Three Arrows Capital (3AC) and Celsius, DeFi is much more transparent, with freedom in the law, participation in governance, and fair distribution of benefits. We want to enable that at Orderly Network. We have a very experienced team building trading infrastructure, trading DeFi, and trading CeFi. We want to provide the best infrastructure for the future dApps to build on, incentivize and reciprocate all benefits to the contributors.
”We want to provide the best infrastructure for the future dApps to build on, incentivize and reciprocate all benefits to the contributors.
vVv: What was your original thought behind building Orderly? What did you see going wrong in the rest of the space?
Ran: My partners and I own a few crypto companies starting with Chronos, a high-frequency trading firm that trades across different DeFi and CeFi venues. Centralized exchanges are much better than when we first started. Decentralized infrastructure is still in the very early stages, and the UI/UX is not up to par yet with CEXs. There are too many clicks, bridging, and unfriendly UI/UX. There’s a lot of room for improvement in DeFi.
Regarding order books, DeFi liquidity and general user experience cannot compare to CeFi, and DeFi infrastructure needs a critical orderbook infrastructure. We liked the NEAR team and their technology. So we set out to build the missing multi-chain infrastructure for the future, where there will be embedded liquidity, and dApps can connect to that liquidity via orderbooks.
”We set out to build the missing multi-chain infrastructure for the future, where there will be embedded liquidity, and dApps can connect to that liquidity via orderbooks
vVv: What is the core technology that has allowed you to bring the performance up to par with centralized exchanges (CEXs)?
Ran: Orderly is a hybrid model, and we’re currently optimizing performance with our centralized order book, but we’re also building out a decentralized version. The core team at Orderly has extensive experience building a centralized exchange. Once the order book is complete, there needs to be liquidity. Our trading background helps in this regard, and we have market makers to support this process. We also brought on many great partners, other market makers like Ledger Prime, Alpha Grab, Alameda, Jump, Amber, and GSR, who are all expected to trade on Orderly. This ecosystem must have adequate liquidity to make it work, and the infrastructure (tech plus liquidity) is critical. The third part is growth; we have experience growing the ecosystem and the user base, which is something most other DeFi projects lack. Once we combine everything with DeFi native structures, like incentivization, governance, and contributed liquidity, we will be on par with CEXs.
vVv: Please elaborate on why you choose to build on NEAR.
Ran: A few years ago, members of our WOO team met Illia from the NEAR and had a great conversation. They’re true dreamers and believers in Web3 and want to onboard 1 billion users to NEAR. They are not in it for the money and have a dream they want to realize. The NEAR team is one of the most intelligent and tech-savvy that we’ve ever met. It’s been great working with them thus far, and they’ve been highly supportive. They’ve come out with many innovative products and solutions, and the speed at which they’ve finished Aurora, their EVM layer, was astounding. So, working with them has been a great experience. NEAR had the right technology, mindset, attitude, and integrity, which made us eager to work with them. They’ve been more active in marketing and business development, and we’re helping them with that.
vVv: Is the chemistry between the individuals, the companies, and the investors you work with necessary? If they provide enough upside, do you compromise if their values and vision do not align?
Ran: We care about values, integrity, and having a greater purpose, and we believe that the NEAR team has all these qualities. In selecting investors for Orderly, we pick people who can help grow the ecosystem because it’s all about getting the tokens or just having the upside be shared with people who can help the system grow. That’s why we have multiple market makers like Jump and Alameda and builders like Raydium and LayerZero. Some VCs that invested in NEAR and WOO, like Pantera and 3AC, have been big supporters of both ecosystems. Except for 3AC, everyone is still with us, and this is the only way that it will work. We are not financially driven; our investors are very strategic. Our shared goal is to mutually support and grow this ecosystem. It’s not about the upside; it’s about building something truly big that people believe in and can contribute towards.
”Our shared goal is to mutually support and grow this ecosystem. It’s not about the upside; it’s about building something truly big that people believe in and can contribute towards
vVv: How do you incentivize builders on your platform?
Ran: Builders can invest and apply for Orderly and NEAR grants. We provide the technology and support to build on top of NEAR most efficiently. First, there’s a very large percentage of fees that are shared with UI builders. It wouldn’t make sense for them to build elsewhere because there’s an equal split between us, and all the liquidity is already provided for them. We want to incentivize builders with an offer that they can not refuse. We have quite a bit of traffic and anticipate our followers and community to grow further. Traffic is another angle for the Orderly builders. In addition, we can help these builders raise capital from our partners, public listings, and liquidity provisions. Orderly has a lot of things that we can help with and are well-versed in.
vVv: Do you plan to raise another round for the Orderly Network, or are you already fully funded?
Ran: We have no capital shortage but want to align our contributors’ interests. Therefore we will have future funding rounds. I’m not sure when but it will not be exclusive to the institutions that have already invested in Orderly but rather to new contributors. It’s more about building out the ecosystem than raising capital.
vVv: By placing all stages of an order onto the blockchain, isn’t it time-consuming to ask every node to permanently store orders via miners and pay a fee? Could this hold back adoption?
Ran: Currently, we’re optimizing performance, so the on-chain activities, such as depositing, withdrawing, and asset amounts on the smart contract, are fully transparent on NEAR. The trading itself is performed off-chain, similar to dYdX. While optimizing performance, only some trades, orders, or cancellations are on-chain. We’re working closely with NEAR on the fully on-chain solution. The good thing about Orderly is that everything is modularized. The spot order book, the off-chain order book, the future on-chain order book, and the purchase order book are all different modules. DApps can choose which module they will use, and they may even use a combination of the two in an aggregated form. They may have to use spot or integrate a perpetual feature; it’s up to them. We’re modeling this off TradFi, where the custodian, matching, and brokerage are separate rather than combined in CEXs.
vVv: Do your institutional investors see Orderly’s modularization as a possible threat? What’s their perspective?
Ran: They perceive us as complimentary. Our TradFi investor brokerages are interested in plugging into the Orderly infrastructure and liquidity. They want a transparent and facile way for their clients to access crypto liquidity and yields. They’re even interested in reviving some of their illiquid assets in tokenized securities if they were to be listed on Orderly and in compliance with KYC and AML regulations. Because listing on Orderly means accessing liquidity for illiquid assets. This may be further in the future, but we’re also exploring this. In conclusion, there are many angles with institutional investors; they definitely perceive us as a partner rather than a competitor because we’re their backend infrastructure.
vVv: How do you navigate the KYC and anti-money laundering (AML) regulations?
Ran: We’re actively exploring this with some investors and partners. It needs to be clarified, but it may take shape as permission order books and separating the public order book from different permissioned ones for different types of abusers. The good thing is that we’re more the backend and frontend platforms are already licensed, and we only require some of the regulatory licenses of frontend platforms.
vVv: Is your business model fee-based?
Ran: Yes, we have low trading fees compared to DeFi; it’s more on par with CeFi. We haven’t published tokenomics yet, so I can’t disclose that. I can say that fee splitting to contributors will be very transparent, whether they are a UI holster, trader, or staker. In turn, they onboard more users and traffic to the ecosystem. There will be other revenue sources in the future.
vVv: Do you see any direct competitors?
Ran: There are a few order book decentalized exchanges (DEXs) out there, but we’re more of an order book infrastructure. We’re not trying to be a DEX; we enable other DeFi applications, not necessarily limited to DEXs. We’re starting with NEAR, and our vision is going multi-chain because that’s where the future lies. We have yet to see others tackling this goal, but there are inklings of guys who are trying to do this now. Currently, there are only a few competitors in terms of DeFi. There’s less worry about competition because this space is so small compared to CeFi. Also, crypto is minuscule compared to TradFi and the market cap in general, so we don’t worry too much about competition but instead focus on building the perfect product and infrastructure for builders and users.
vVv: For your multi-chain goal, did you consider Solana, Avalanche, or Polkadot? And if so, which would be your first choice?
Ran: We are undecided at the moment but we’ll choose a few. Given their current issues, Solana raises concerns. On the WOO side, we have experience building on many different chains. WOOFi is already a multi-chain swap, and now there is the DEX and the order book. The swap is built on Polygon, Binance Chain, Avalanche, and Fantom. We have plenty of experience building on the EVM chains and have the relationships and support of those ecosystems; it will be easy for us to enter these chains.
vVv: dApps built on the Orderly Network share liquidity. If one dApp built on the network is compromised, are the others affected? How does the protection mechanism work?
Ran: If a dApp is compromised, the other dApps sharing liquidity would not be affected. However, if the Orderly smart contract is hacked, then all dApps would be affected. This is a good question for our CTO.
vVv: How will the future token work within the Orderly Network?
Ran: We can’t disclose this, but we are working on this with investors. The ethos of Orderly is that we want full reciprocity of the value added to the contributors. A big part of this will be allocated to the token holders and the contributors in the governance.
”The ethos of Orderly is that we want full reciprocity of the value added to the contributors
vVv: The Layer-1 war is still ongoing, and the possibility of NEAR potentially becoming obsolete exists. Do you have a plan if that is the case?
Ran: With respect to the base chain, we do have backup plans for that trajectory. Personally, I don’t see that as an eventuality. NEAR has a great team, vision, integrity, technology, and funding. Comparing it to Solana, you can think of us as the Serum of Solana, but more modularized and multi-chain. The combination of Raydium and Serum drove the kickstart of all the traffic to Solana. We have a high conviction that NEAR will be here to stay, but we have backup plans if that does not pan out. The goal is to be multi-chain because that is the future of blockchain.
”The goal is to be multi-chain because that is the future of blockchain
vVv: Does non-native trading tokens on NEAR require them to be wrapped? Will you be using any custodians?
Ran: Current assets are non-native, and Rainbow Bridge has different versions of wrapped assets. The current wrapped assets on Orderly, like ETH, are Rainbow wrapped, and USDC & Tether are working with those entities to create non-wrapped native NEAR versions.
vVv: Does having an on-chain order book help with slippage and liquidity issues of a DEX?
Ran: One reason liquidity is more scalable on-chain is that DeFi is composable. In the future, we could see this through DeFi aggregators and on-chain market makers who aggregate liquidity. This is across AMMs (automatic market makers) and PMMs (permissioned market makers) order books and can be reflected in an order book structure or even in the swap structure. AMM structure will be more challenging to implement due to the equation. It’s a more straightforward process for a CEX, because CEXs are not interoperable. There will likely be a future where DeFi has better liquidity than CeFi, which is already the case for AMMs for altcoins and tail assets. I could also see this happening for the major coins, and it’s already happening for stablecoins and stablecoin swaps. The second advantage is the transparency that DeFi brings. It’s more conducive to people using it in general and parking assets rather than centralized exchanges.
vVv: Are the same community pools available for all DEX on Orderly, or does each DEX need to build its own? Is there any advantage to sharing those pools?
Ran: Yes, these will be available. There will be shared infrastructure for all the dApps on Orderly. The goal with community pools is to bring a permissionless listing of assets on an order book, which has yet to be done. Community pools will happen early next year, and any assets can be deposited in these pools, whether stables or other assets. There will be incentives for market makers willing to borrow and provide liquidity for those assets, given market-making quotas like uptime and spreads. Any market maker who borrows from the assets or pools and provides liquidity that meets a certain standard will automatically get listed. Any of the dApps can take that pair and list it on their dApp. We want it to be as permissionless as possible for an asset to get listed on an order book.
”It’s all about the future builders, contributors and everyone who wants to have the same user experience in DeFi as in CeFi
vVv: You mentioned a couple of times about the ethos of Web3 and multi-chain future. What excites you the most about the direction of this space and the future potential big upsides?
Ran: For DeFi, we’re super early, and there are a lot of innovations. For example, as a percentage of volume, perpetual trading is small compared to spot trading and has lots of room to grow. Currently, the UI/UX is not good, so I imagine a world where DeFi has an equal if not better, user experience than CeFi. It will be more interactive and exciting because it will be decentrally built instead of by a centralized entity like CEXs.
NFTs, Metaverses, and other projects outside crypto native circles are bringing in more daily users. There are about 200-300 million crypto users worldwide, and that’s growing via these NFTs, Metaverses, and GameFi. Overall we’re very early in each of those, and I can imagine cool triple AAA games and NFTs with great utility. The space in 5 years will be inspiring, including social applications utilizing the blockchain for messaging and perhaps other things. All of these need financialization, whether an NFT or a swap embedded in a social app. Orderly can be the infrastructure for all that because everyone will need some trading function or borrowing and lending yield. The great thing about DeFi is everything is interoperable and open, so the efficiency is high, and people will build fast. It’s just super, super exciting to provide infrastructure for this fast-growing space and support the projects being built.
”The space in 5 years will be inspiring, including social applications utilizing the blockchain for messaging and perhaps other things. All these need financialization, whether an NFT or a swap embedded in a social app. Orderly can be the infrastructure for all that because everyone will need some trading function or borrowing and lending yield
vVv: Is the 5 year timeline toward mass adoption taking place before we can see a rise in volume across all niches within the space? Or is it a time horizon in the next 1-2 years?
Ran: 5 years is a reasonable timeline, depending on how you define mass adoption. It could, of course, be sooner, depending on the next bull market. Web3 as a whole will grow rapidly, not only from the retail front but from the institutional side as well. We’re engaging with institutions from investors to banks to brokerages; they all want to access liquidity and more innovative products. At this point, everyone is coming into the space, and it’s exhilarating.
Listen to the Spotify recording below for the full Orderly Network AMA.