Overview

Problem

Most centralized exchanges match orders based on a first-in-first-out (FIFO) system, meaning traders can gain an advantage by getting their orders to arrive slightly earlier. This is known as “latency arbitrage” and results in a winner-takes-all system where the fastest player reaps all of the profits. To gain an edge, billions of dollars are spent yearly in a technological arms race, such as investments in submarine cables and microwave towers.

Unfortunately, these profits come at the cost of liquidity providers, who must quote higher spreads to remain competitive. As a result, exchanges often charge higher “taker fees”, which increases the cost of trading for all exchange users. To make matters worse, users not optimizing for speed end up paying for this wasteful arms race between high-frequency traders, leading to deadweight loss as many otherwise profitable strategies are no longer viable.

Solution

Quiver is an exchange designed to make providing liquidity easy while taking liquidity away hard.

Incoming orders go through an auction, which adds a fraction of a second delay, and reduces latency arbitrage incentives. During this delay, market makers and arbitrage bots can update their orders according to what happens on other exchanges. This creates a level playing field for liquidity providers, allowing them to better compete with high-frequency liquidity-takers, and therefore offer tighter spreads.

This auction is based on a Vickrey Auction system with the property of incentive compatibility. Systems with this property make sure they cannot benefit from bidding lower than their true value, encouraging bidders to submit their true values. This allows price competition among arbitrage bots (the bidders), generating price improvements to limit orders.

Quiver also solves the liquidity fragmentation problem, with a built-in aggregator that leverages arbitrage bots to serve large orders efficiently.

Security & Business Model

Quiver is a hybrid cryptocurrency exchange that offers perpetual futures trading. Perpetual futures are bets that track the performance of the underlying asset, enabling efficient bets on real-world assets such as stocks, bonds, and commodities.

We run as a centralized exchange in its alpha version, and users are required to sign a message proving ownership of the account. Stablecoin conversions are supported, and all user USD balances are backed by USDC stored on a single multisignature safe contract in the Ethereum Mainnet.

Quiver's business model is completely focused on trading fees. We only charge fees when closing profitable trades. Fees are capped to 0.1% of trade volume, and are never higher than 10% of trade profits. Despite these low fees, our business model is sustainable because we don’t need to subsidize liquidity. Furthermore, our unique fee model encourages users to make many small trades, meaning higher organic trading volume.

Path to Decentralization + Strategic Roadmap

Quiver is on a path to be a fully decentralized finance platform. The technology is fully compatible with the proven model of off-chain matching with on-chain settlement, used successfully by projects such 0x, Loopring and StarkEx.

Using the off-chain matching system and with settlement on major successful rollups, we can offer the same liquidity across the whole crypto ecosystem.

We aim to offer synthetic markets in all major asset classes, allowing users to keep a diversified portfolio on-chain. At the moment we are working on basic but important features such as stop-loss and take-profit orders, standardizing Quiver APIs and creating structures to create new markets quickly.

Down the line, Quiver will use perpetual futures to provide deep liquidity in all major markets and offer advantages such as leverage and short-selling without complicated borrowing operations. Ultimately, we hope to become the go-to trading platform for both crypto-native retail users and professional and institutional traders.