Research
Elixir Network: Discover the DeFi Project Revolutionizing DEX Liquidity
Discover how Elixir Network enhances DEX liquidity with its modular architecture, cross-chain solutions, and staking model.
Author
Imperator
Date
20 août 2024
Elixir is a cross-chain, composable, and modular DeFi protocol utilizing a DPoS (Delegated Proof of Stake) consensus mechanism. It is designed to facilitate efficient order book liquidity on decentralized exchanges (DEXs). In this article, we’ll dive into Elixir’s architecture, Elixir staking model, and the benefits it brings to the broader DeFi ecosystem.
What is Elixir Network ?
Elixir Network is a modular decentralized finance (DeFi) protocol created to improve liquidity among order book decentralized exchanges (DEXs). A modular network is a platform with numerous modules designed to perform specific roles to boost the network's overall performance. For instance, one of its modules is an order book, which allows liquidity service providers to integrate it into their platforms easily. Once integrated, it will enable users of these DEXs to provide liquidity and earn market maker rewards.
Elixir Network provides the necessary infrastructure for order book service providers to connect and deliver their services among a cross-section of order book DEXs across various blockchains.
The Premise of the Network
Exchange or transfer of value in the blockchain space was initially facilitated primarily by peer-to-peer (P2P) transactions and centralized exchanges. However, the latter, which handled most of the transactions, is fraught with multiple challenges, such as hacking and security breaches, limited liquidity, regulatory vulnerability, centralized finance, and less privacy.
Because of the drawbacks mentioned above, the space gravitated towards decentralized exchanges. The first-generation DEXs are automated market maker (AMM) decentralized exchanges, which facilitate value transfer via the combination of mathematical models, smart contracts, and liquidity pools. However, AMM DEXs have inherent limitations, such as liquidity crunches for specific or unpopular asset pairs and large trades. Besides, the considerable price fluctuations they experience often cause slippage. In addition, centralized liquidity service provision, which they all rely on, is considerably costly.
Elixir Network is designed to facilitate the operations of a more transparent, cost-effective, and highly efficient approach to value transfer: order book DEXs. However, even these perp and spot order book DEXs experience fundamental challenges in bootstrapping liquidity, which Elixir Network addresses.
Who Created Elixir Network?
The Elixir Network was created by a team led by Chris Forte, the founder and CEO. The project was jump-started in January 2023 by a $2.1 million Seed Funding led by Arthur Hayes, Ava Labs, Chapter One, Commonwealth, and FalconX.
The team raised a further $7.5 million in Series A. This funding round, which brought it to a $100 million valuation, was led by Hack VC with participation from AngelList Ventures, Bloccelerate, Ledger Prime, Genesis Trading, and Hudson River Trading.
The project has closed another round of funding, Series B, which brought in $8 million from Mysten Labs and Maelstrom. Other investors included Amber Group, Flowdesk, GSR, and Manifold.
How Does Elixir Network Work?
The Elixir Network is designed to facilitate deeper liquidity across order book DEXs. The primary aim is to wrestle the responsibility of providing deeper liquidity from the hands of centralized firms and pass it to retail users.
The network delivers on this mandate by relying on its decentralized, modular infrastructure designed for high throughput. Elixir reaches DPoS consensus for orders placed on the exchanges that integrate its infrastructure. The fraud proof of the transactions is posted on the Ethereum Mainnet.
The Elixir Network Infrastructure operates on two planes to complete its transaction: the Off-Chain Network active on the DEXs that integrate Elixir and the On-Chain Smart Contract on the network’s relay infrastructure and dispute resolution component.
The Off-Chain Network
The Off-Chain aspect of a transaction, essentially the consensus execution phase, entails getting data from the integrating DEXs, running algorithms, validating the transactions, and conveying the signed orders to the Relay Infrastructure.
The Off-Chain Network relies on Exchange Feeds, a Data Aggregator, and a DPoS Validator Network.
Exchange Feeds - Receive read-only credentials from every integrating DEX and assign the data to a single update stream before broadcasting it to a data aggregator.
Data Aggregator - Prepares a deterministic data frame from the information received from the integrating DEXs. Signs and broadcasts the data frame to validators and auditors. This tech stack ensures that validators process correct information.
Validator Network - This component, anchored on Elixir's delegated proof of stake system, is powered by end-users who delegate their stake to validators.
The Data Frames mentioned above refer to consistent streams of accuracies and truths that enable the Elixir security infrastructure and end users to verify the correctness of information conveyed in the network.
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The On-Chain Smart Contracts
The Relay Infrastructure, which holds the trading keys for integrated exchanges, also tallies order proposal frames coming from validators, which it then passes to the auditor for verification upon their expiry.
The Relay Nodes access exchange keys using a secure enclave technology and a multi-party computation (MPC) toolkit. MPC is especially ideal because it allows various parties to compute data jointly without necessarily viewing each party's data.
The dispute resolution phase of the on-chain process relies on two components:
Auditor Nodes - Receive and process order proposals from the relay nodes and the data frames conveyed by data aggregators. The nodes execute the strategy based on the data received, verifying the correctness of the orders. The nodes are responsible for summoning an on-chain function in the controller if they encounter a malicious input.
The Controller Smart Contract - Manages staking, rewards distribution, and slashing to penalize malicious acts. If the Auditor Nodes relay a dispute, the controller checks for 66% consensus on the active validator set and penalizes the malicious validator.
More than 30 orderbook DEXs have integrated Elixir Network so far. These platforms include Vertex, RabbitX, Satori, HyperLiquid, Orderly Network, and Injective.
The Benefits of Elixir Network for DEX Liquidity
Improved Liquidity and Performance for DEXs
Elixir Network seeks to provide its novel liquidity solutions, enabling the more than 30 integrating DEXs to offer their users seamless and trustless trading. The network is engineered for reliability, efficiency, and high performance. It has a block time of 0.86 seconds and a throughput of 395 TPS, which the developers say makes it capable of facilitating high volumes of trading activity at rapid transaction speeds.
Exchanges integrating Elixir improve liquidity management and offer enhanced, efficient, and speedy trading experiences. In addition, Elixir enables innovations that allow these exchanges to improve transparency and promote trust across the network.
Decentralized Liquidity for Greater Flexibility
The protocol has unveiled a new liquidity front for exchanges. The retail liquidity that Elixir allows DEXs to tap into limits dependence on centralized liquidity providers (LPs) for deep liquidity and the crunches associated with these providers. Instead, it taps into a new, deeper market, allowing end users to earn rewards and create novel sources of organic yields.
The decentralized liquidity market provided by Elixir is a reliable alternative that exposes integrating DEXs to a broader liquidity pool. This source helps these DEXs limit or eliminate the risks associated with market fluctuations on order books. Besides, these liquidity markets have flexibility that exposes the exchanges’ users to secure and stable trading experiences even when markets undergo high volatility.
The decentralized approach to providing liquidity for DEXs eliminates the risks associated with market manipulation. Besides, traders get a more secure trading environment. This novel technology has unique and critical competitive advantages that can draw a wider pool of users to the exchanges, redefining the dynamic digital asset market.
What Makes Elixir Network Unique?
Dipping adequately into the liquidity market is a highly costly undertaking for order book DEXs. Until recently, the options for raising deep liquidity involved constant and petulant marketing to get adequate users to deposit liquidity or rely on inflated airdrop campaigns. The former is not sustainable long-term, while the latter has the knack of attracting mercenary capital.
The liquidity a DEX attracts is often subject to the LPs it is exposed to, its parent blockchain, and the gas cost. Elixir is leveling the playing field by allowing anyone to deposit liquidity into an order book, eliminating all the critical challenges that plagued the liquidity market before the network’s entry.
The ELX Token: Key to Elixir’s Success
The ELX token is the native utility token of the Elixir Network, used to govern the Elixir ecosystem. Essentially, the token powers the network and allows holders to decide the ecosystem’s future.
The mainnet of the Elixir Network supports a fully decentralized protocol. This arrangement incorporates a decentralized structure with a community-led governance format run by ELX token holders.
The system envisions a node and validator infrastructure as the core network component run almost entirely by ELX tokens. As such, the network requires nodes and validators to stake a predetermined amount of tokens to help uphold its security.
The network aims to use ELX tokens to build fluid, efficient, and effective governance processes, establish a sound economic security incentive tool, decentralize the platform, and make it as permissionless as possible.
Elixir Network in Summary
Elixir Network is a modular, decentralized protocol designed to help order-book DEXs find reliable liquidity. It is composable and can easily be integrated into the core infrastructures of DEXs that want to use its approach to generate deep liquidity. The network’s infrastructure comprises two planes: an off-chain network that receives, aggregates, and validates transaction data from exchanges and a smart contracts-controlled on-chain aspect that verifies the correctness of inputs and distributes rewards. The network's native utility and governance token is ELX.
Stake Elixur Network with Imperator.co!
Maximize your ELX staking rewards : earn more, start now.
Stake Elixur Network with Imperator.co!
Maximize your ELX staking rewards : earn more, start now.
