Dual Flow Batch Auction (DFBA)

⚠️ EXPERIMENTAL - NOT AUDITED
This is an experimental implementation for research and educational purposes only.
DO NOT USE IN PRODUCTION. The contracts have not been audited and may contain critical bugs.
Use at your own risk.

A decentralized exchange protocol using time-based batch auctions to achieve fair price discovery and eliminate MEV extraction. Orders accumulate for fixed 1-second batches, then clear atomically at uniform prices for buyers and sellers.

Inspired by Jump Crypto's DFBA design

How DFBA Works

Time-Based Batching

• Fixed duration: Each batch runs for 200ms on L2 deployment (BATCH_DURATION)
  • Demo uses 1 second due to Anvil's block.timestamp update behavior
  • L2s like Arbitrum, Optimism support subsecond block times for true 200ms batches
• Batch ID: floor(block.timestamp / BATCH_DURATION) - guarantees liveness even if finalization is delayed
• Order submission: Users submit orders for current or near-future batches (up to +10 batches ahead)
• Cutoff: Orders must arrive before batch end timestamp

Dual Auction Mechanism

Each batch runs TWO separate auctions simultaneously:

1. Bid Auction: Maker-Buy vs Taker-Sell

   • Maker-Buy orders: Limit bids to buy at specific prices
   • Taker-Sell orders: Market sells willing to accept bid-side prices
   • Clearing: Highest bid that matches supply/demand

2. Ask Auction: Maker-Sell vs Taker-Buy

   • Maker-Sell orders: Limit asks to sell at specific prices
   • Taker-Buy orders: Market buys willing to pay ask-side prices
   • Clearing: Lowest ask that matches supply/demand

Four Order Types

• Maker-Buy (MB): "I want to buy X at price P or better" → contributes to bid liquidity
• Maker-Sell (MS): "I want to sell X at price P or better" → contributes to ask liquidity
• Taker-Buy (TB): "I want to buy X, willing to pay up to P" → crosses into ask auction
• Taker-Sell (TS): "I want to sell X, need at least P" → crosses into bid auction

Clearing Process

After batch ends, finalization processes orders in phases:

1. DiscoverBid: Find clearing price for bid auction (MB vs TS)
2. ConsumeBidDemand: Fill taker-sell orders from bid auction
3. ConsumeBidSupply: Fill maker-buy orders from bid auction
4. DiscoverAsk: Find clearing price for ask auction (MS vs TB)
5. ConsumeAskSupply: Fill maker-sell orders from ask auction
6. ConsumeAskDemand: Fill taker-buy orders from ask auction
7. Finalized: Batch complete

Orders are processed incrementally (100 ticks per finalizeStep) to avoid gas limits.

Architecture

Core Contracts

• AuctionHouse (src/core/AuctionHouse.sol): Central batch auction mechanism with incremental finalization
• CoreVault (src/core/CoreVault.sol): Unified collateral vault with subaccount support, manages deposits/withdrawals and reserves
• SpotRouter (src/core/SpotRouter.sol): Handles spot order submission with automatic escrow locking and EIP-712 signatures
• PerpRouter (src/core/PerpRouter.sol): Manages perp orders with position tracking, initial margin reserves, and risk checks
• PerpRisk (src/perp/PerpRisk.sol): Risk engine for calculating initial margin requirements for perp positions

Supporting Components

• Scripts (script/): Foundry scripts for deployment, testing, and batch management
• Tests (test/): Comprehensive test suites including unit, fuzz, and invariant tests

Key Features

• L2-optimized: 200ms batch windows on Arbitrum/Optimism/Base
• Tick-based pricing: Bitmap storage for gas-efficient price level management
• Dual clearing: Independent uniform-price auctions for bid and ask sides
• Role-based access: Routers enforce pre-funding (spot) and margin requirements (perp)
• Subaccounts: Multi-subaccount support for isolated positions
• Incremental finalization: Gas-efficient batch processing

Project Structure

.
├── src/
│   ├── core/           # Core protocol contracts
│   │   ├── AuctionHouse.sol
│   │   ├── CoreVault.sol
│   │   ├── PerpRouter.sol
│   │   └── SpotRouter.sol
│   ├── perp/           # Perp-specific modules
│   │   ├── PerpRisk.sol
│   │   └── OracleAdapter.sol
│   ├── libraries/      # Shared libraries
│   │   ├── OrderTypes.sol
│   │   ├── Math.sol
│   │   └── TickBitmap.sol
│   └── interfaces/     # Contract interfaces
├── test/               # Foundry test suites
└── script/             # Deployment & management scripts

Development

# Install Foundry dependencies
forge install

# Build contracts
forge build

# Run tests
forge test

# Run tests with gas reporting
forge test --gas-report

# Run tests with coverage
forge coverage

# Deploy (local Anvil)
forge script script/Deploy.s.sol --broadcast --rpc-url http://localhost:8545 --private-key <key>

Available Scripts

• Deploy.s.sol: Deploy all core contracts and set up markets
• PlaceOrders.s.sol: Submit test orders to the auction house
• FinalizeBatch.s.sol: Manually finalize a batch
• Keeper.s.sol: Automated keeper for batch finalization
• CheckMatches.s.sol: Debug script to check order matching results
• CheckOrders.s.sol: Debug script to inspect order details

License

MIT