Ultimate Liquidity Unifier Driving New Trends in Crypto Trading

Forward the Original Title：In-Depth Analysis of Orion: Ultimate Liquidity Unifier Driving New Trends in Crypto Trading

TL;DR

• Orion integrates fragmented decentralized exchanges (DEXs) and centralized exchanges (CEXs) liquidity through liquidity aggregation, virtual order books, and a highly secure cross-chain bridge, simplifying the user’s trading process and delivering a seamless experience.
• Recently, Orion introduced the Refer&Earn campaign, encouraging influencers and loyal protocol users to refer new users. Incentives such as corresponding $ORN rewards and reduced transaction fees are provided. This reward-based referral mechanism not only swiftly expands the platform’s user base but also leverages the natural social networks of community members to spread Orion’s brand, achieving organic growth.
• In a recent development, Orion launched the BRC20 cross-chain bridge, significantly expanding the functionality of the Orion protocol. This enables the protocol to support token creation and exchange on the Bitcoin network, laying a crucial foundation for the expansion of the Bitcoin Decentralized Finance (BTCFi) ecosystem. This advancement not only enriches the application scenarios and value of Bitcoin but also provides Orion with a unique opportunity to connect BTCFi with the broader decentralized finance (DeFi) ecosystem. Considering the rapid expansion of the Bitcoin ecosystem last year, we anticipate BTCFi to become a high-growth area, and Orion, with its cross-chain bridge solution, is poised for significant growth in this domain.

1.Project Overview

Orion Protocol was founded in 2018 with the initial goal of providing a unified, decentralized trading solution. The platform connects to major centralized cryptocurrency exchanges (CEXs) and decentralized exchanges (DEXs) through a liquidity aggregator, enabling users to access the entire market’s liquidity on its decentralized platform to obtain the optimal prices for any token.

Orion Protocol enhances trading efficiency, reduces costs, and provides a seamless user experience by integrating a highly secure cross-chain bridge and virtual order books. The core of the platform lies in aggregating fragmented market liquidity into a unified sea of opportunities, simplifying the user’s trading process while maintaining the high transparency, security, and independence from intermediaries characteristic of DeFi.

In November 2023, Orion Protocol announced the rebranding of ‘Orion Protocol’ to ‘Orion’ to rejuvenate the protocol, providing a clearer and more targeted value proposition. Simultaneously, this rebrand aims to expand the utility and potential of the ORN token.

2. Project Background

2.1 Team

Alexey Koloskov (Founder & CEO)

Prior to serving as the CEO of Orion Protocol, Alexey was the Chief Architect at Waves. During this period, he successfully led the architectural design and development of Waves’ decentralized exchange. Since June 2017, Alexey has been leading the Orion Protocol as the founder and CEO, overseeing the formulation of company strategy, product development, and driving innovation and growth in the blockchain industry.

Kal Ali (Co-Founder & COO)

As an early strategic advisor and co-founder of Orion Protocol, Kal Ali currently serves as a partner at Dominance Ventures, a venture capital firm that has participated in early investments in projects such as Cosmos, Gunzilla Games, and Avalanche.

2.2 Fundraising Rounds

3. Products and Business

3.1 Orion Terminal

Orion Terminal, as the core product of the Orion Protocol, enables real-time access and aggregation of order books from multiple exchanges through its unique liquidity aggregation mechanism. This mechanism covers a wide range of exchanges, including both centralized and decentralized platforms, ensuring users can obtain the best trading prices and depth across the entire market within a single interface.

This innovation not only provides users with optimized trade execution and pricing strategies but also effectively reduces transaction costs and enhances the overall efficiency of the market. The following outlines the implementation path of this mechanism.

3.1.1 deCEX Trading: Decentralized Use of CEXs

Through the Orion Terminal, users are relieved of the cumbersome process of creating personal accounts on centralized exchanges, bypassing individual Know Your Customer (KYC) procedures. Using an account established by Orion in CEX, known as a liquidity node or liquidity provider, users initiate trades by sending them to the liquidity node through atomic transactions (transactions completed in a single step through smart contracts, ensuring either complete success or no execution, with no intermediate state). The node then executes the trade on the CEX, and the user promptly receives the tokens. Unlike traditional DEXs that use Automated Market Maker (AMM) mechanisms, deCEX provides real-time order books, offering more accurate and immediate trading data.

Safety Deviation (SD):

While atomic transactions may ensure users send trade requests at ideal prices with the security of their funds, how does Orion ensure users achieve the best possible prices for their trades? To address this, Orion introduces a Safety Deviation (SD) for transactions.

In simple terms, SD is an automated preset trading slippage. In CEX trading pairs with sufficient liquidity, such as USDT pairs, SD is set to 0. For CEX’s non-USDT pairs (e.g., ETH/BTC), a 0.4% SD is applied. For single swaps in DEXs, a 0.15% SD is applied, and for multi-step swaps, the 0.15% is multiplied by the corresponding number of steps. Throughout this process, Orion does not charge additional fees beyond the actual commission calculated based on the order volume and network fees.

Unlike user-set slippage, although both SD and user-set slippage impact trade prices, SD operates as a fixed, pre-defined mechanism, providing users with a certain level of transparency and predictability in price fluctuations.

Even in extreme market conditions, the system automatically takes measures to facilitate trades. Additionally, the SD mechanism may adopt different coefficients based on various market conditions, such as liquidity and volatility of the trading pairs, offering flexibility and adaptability beyond what manually set slippage can provide, especially in situations of significant short-term market price fluctuations.

However, the SD mechanism itself has certain limitations. For instance, in a trading pool with insufficient liquidity reserves, a large transaction may significantly impact the token price in that pool, and the preset 0.15% slippage may be inadequate to address such changes, potentially leading to the failure of the transaction.

Liquidity Nodes/Liquidity Providers:

During the execution of transactions, Orion allocates orders to specific liquidity nodes through its virtual order book. To maintain the decentralized nature of the network and enhance efficiency, Orion introduces the Delegated Proof of Liquidity (DPoL) mechanism.

In this mechanism, liquidity nodes are required to stake ORN tokens for participation, with nodes having higher staked amounts being more likely to be selected for transaction execution. However, the selection process considers not only the staked amount but also evaluates the types of tokens provided by the node, the blockchain network it operates on, and its reserve status to ensure smooth transaction execution.

DPoL also allows users to influence node selection by delegating ORN tokens to specific liquidity nodes, aiming to balance the interests of users and nodes. This process enhances decentralization and user participation by allowing nodes to set transaction fees and share profits with users.

Asset Security and Autonomy:

In terms of asset security and user control, Orion Terminal offers a mode of trading directly from the user’s wallet. Through the liquidity aggregator, users act as the order delegator. After creating an order through Orion, the aggregator interacts with liquidity nodes for acceptance. Information such as the order address, trading platform, and order quantity for each order is publicly accessible and verifiable.

This model reinforces asset security, ensuring that user funds remain under their direct control, reducing the risks of fund theft and misuse associated with traditional centralized exchanges. Even in the event of Orion Terminal failure, the liquidity node network and smart contracts continue to operate normally, allowing users to participate in trading through Orion’s liquidity and financial services.

This design embodies the core principles of decentralization, enabling users to transact securely and freely without relying on any third party.

3.1.2 Transmuted AMM Price Curves: Using DEXs in the same way as CEXs

Traditionally, decentralized exchanges (DEXs) like Uniswap V3 employ Automated Market Maker (AMM) mechanisms with price curves to determine prices, differing from the order book-based approach used by centralized exchanges (CEXs) for clear comparison and trading. The AMM price curves make it difficult to directly compare their liquidity with the order books of centralized exchanges.

Orion’s innovation lies in transforming AMM price curves into a traditional order book format, allowing AMM liquidity, such as that in Uniswap V3, to be displayed and compared similarly to centralized exchanges like Binance or OKX.

This transformation not only facilitates easier price comparisons but also enables the setting of limit orders on AMM, enhancing trading flexibility. Additionally, by converting AMM price curves into order books, Orion ensures seamless integration and comparison of AMM liquidity with CEXs, creating a unified trading platform for users.

3.1.3 Virtual Order Books: Combining DEXs and CEXs Order Books to Find the Optimal Price Path

Virtual Order Books (VOBs) combine the direct trading approach of traditional Order Books (OOBs) and the liquidity model of Automated Market Makers (AMMs), creating a unified trading platform. VOBs not only display information for direct trades but also reveal potential liquidity advantages through multi-step swaps.

For example, a trade exchanging Token A for Token C using an intermediate token (Token B). Continuously calculating complex swaps means it can continually update and optimize trade opportunities, providing traders with new and competitive prices, as well as arbitrage opportunities that may not have been discovered previously.

Combining these three key technologies, Orion Terminal undoubtedly represents an initial ideal form of liquidity aggregation trading products. However, its specific reliability and price discovery capabilities still remain to be validated by the market.

3.2 Orion Bridge

Orion Bridge partially addresses the challenges of cross-chain transactions in the cryptocurrency market, achieving a truly efficient decentralized cross-chain bridge. The core of this technology lies in its integrated approach, embedding cross-chain, cross-exchange liquidity aggregation directly into the backend of the Orion Terminal, providing users with a seamless, fast, and secure trading environment. Compared to existing bridges, Orion Bridge provides a trading experience with no restrictions, no delays, no order rejections, no funds locked, and no risk of exploitation, which largely solves many problems existing in other cross-chain bridges on the market.

Orion Bridge is supported by three core technologies: Atomic Swaps, P2P Network, and Broker Network. Atomic Swaps allow for instant exchange of assets on different blockchains without wrapping assets or delays. P2P technology achieves true decentralization, enabling assets to be exchanged directly between individuals without the intervention of central institutions. The Broker Network ensures the immediacy and smoothness of transactions, regardless of transaction size.

In the first iteration of Orion Bridge, seamless connectivity between Ethereum and BSC has already been achieved, and a BRC20 cross-chain bridge will be launched soon, allowing BRC20 tokens to trade with EVM-compatible chains like MATIC and BSC. Notably, ORN is the only token among Binance-listed tokens that incorporates the BTCfi concept.

3.3 Orion Pools

Orion Pools is a decentralized liquidity pool platform built on the Uniswap V2 model. The platform allows users to contribute liquidity, create new liquidity pools, and personalize their experience by adding custom tokens, ensuring an active and vibrant trading environment.

The design philosophy of Orion Pools emphasizes empowering users, providing them with the ability to create, contribute to, and customize liquidity pools through a simplified user interface and process.

In terms of operational procedures, Orion Pools provides intuitive guidance, allowing users to easily create new pools or add liquidity to existing ones. The process of creating a new pool involves selecting or adding new tokens, suggesting pairs with USDT for integration across the Orion platform, uploading token icons (for new tokens), and completing the transaction to confirm the creation of the new pool. The process of contributing liquidity includes selecting the preferred pool, entering the quantity of assets to contribute, and confirming the transaction through the wallet. These processes are not only user-friendly but also enhance the platform’s liquidity and trading efficiency.

By contributing assets to liquidity pools, users not only facilitate seamless trading on the platform but also receive a portion of the transaction fees as a reward, establishing a mutually beneficial relationship. Orion Pools not only provides an opportunity to earn rewards but also allows users to become part of a broader trading ecosystem, enhancing their sense of participation and belonging.

With the implementation of the new governance and liquidity mining system, Orion Pools is transitioning to a more sustainable and growth-oriented model. The new system, effective since December 5, 2023, emphasizes support for protocol growth and sustainability while ensuring consistency with user interests. This transition not only increases the platform’s attractiveness but also aims to attract more users to participate in the Orion ecosystem.

3.4 Orion Widget

The Orion Widget, introduced by the Orion Protocol, is an innovative application designed for cryptocurrency trading platforms and decentralized application (dApp) developers. It aims to enable token trading functionality quickly on any webpage or application through a simplified integration process. Leveraging the liquidity from Orion’s CEXs and DEXs, the tool allows users to trade directly by connecting their wallets, enhancing the convenience of trading and user experience.

The core advantages of the Orion Widget lie in its high customizability and ease of integration. Developers can customize the appearance and functionality of the widget through a set of predefined parameters, including theme styles, default trading assets, tradable asset lists, initial trade amounts, and fee assets, to meet the specific needs of different platforms and user groups. This flexibility ensures that the widget seamlessly integrates into various web page and application environments while maintaining brand consistency and user-friendliness.

Moreover, the integration process for the Orion Widget is extremely simple, supporting integration through scripts and iframes with minimal coding requirements. This significantly reduces the technical barriers, allowing even non-technical developers to easily deploy trading functionality on their platforms. This not only accelerates the development cycle but also reduces development costs, providing projects with greater flexibility and scalability.

Regarding token listings, the Orion Widget supports hundreds of tokens already listed by the Orion Protocol and ensures support for tokens not listed through its extensive liquidity sources, further expanding users’ trading choices. This feature is particularly suitable for projects that wish to offer specific token trading services on their platforms without worrying about liquidity or token support issues.

4. Growth Points

4.1 Refer & Earn for Rapid User Growth

Orion Protocol’s Refer & Earn initiative is a plan aimed at expanding its user base. Through this program, Orion encourages influential figures and loyal users to recommend new users to join, offering $ORN tokens as a reward incentive. Participants can apply to join this program by contacting @TradeOnOrion on Telegram.

Referrers can share a referral link, and the referred users enjoy a 10% trading fee discount when trading on @TradeOnOrion. In return, referrers can earn rewards of up to 70% or more based on the generated trading fees from referrals. Rewards are distributed in real-time through the BNB Chain’s $ORN token. As the program progresses, more opportunities will be opened for users interested in becoming referrers.

Additionally, active referral networks and high trading volumes not only receive basic rewards but also have the chance to earn additional $ORN token rewards on the leaderboard. Rankings on the leaderboard are based on the network’s trading volume and the amount of ORN tokens in the wallet over the past 14 days. Orion adjusts the leaderboard budget monthly to temporarily increase referral rewards, which are distributed hourly and can be claimed on the BNB Chain.

This reward-based referral mechanism not only rapidly increases the platform’s user base but also spreads the Orion brand through the natural social networks of community members, achieving organic growth. Community members directly benefit from their referral activities, enhancing loyalty and enthusiasm towards the platform.

Moreover, the “Refer & Earn” activity incentivizes users who trade through referral links with trading fee discounts. This not only directly reduces users’ trading costs but may also attract more trading activities to migrate to the Orion platform. With an increase in trading volume, liquidity on the platform will also improve, attracting more users and traders, creating a positive feedback loop. Additionally, increased trading activity enhances the platform’s market competitiveness, attracting more projects and partners to focus on and join the Orion ecosystem.

By implementing a multi-tiered reward system, Orion encourages chain referrals among users, fostering long-term community activity and engagement. The real-time distribution of rewards and additional incentives based on leaderboards further enhances the attractiveness of the activities, sparking active user participation. This long-term user engagement and community building are crucial for the platform’s stable growth and sustained development.

4.2 BRC Cross-Chain Bridge and Pioneer in BTCFi

AAccording to OrdSpace, there are currently tens of thousands of BRC20 tokens with a total market cap exceeding $2 billion. This market has proven its popularity, demonstrating high demand for such assets among users. Orion, as a cross-chain bridge connecting Bitcoin and other blockchain networks such as Ethereum, BNB Smart Chain, etc., is one of the few infrastructures supporting the BRC20 standard. This gives Orion the advantage of being a market pioneer, helping attract early adopters and investors.

Additionally, by supporting the BRC20 cross-chain bridge, Orion can attract users and developers interested in exploring new financial products and services on the Bitcoin network. This cross-chain functionality will significantly increase Orion’s liquidity and trading volume.

The introduction of the BRC20 cross-chain bridge enables Orion to support the creation and transfer of interchangeable tokens on the Bitcoin network, providing a crucial foundation for the development of the BTCFi ecosystem. This not only increases the use cases and value of Bitcoin but also presents Orion with a unique opportunity to connect BTCFi with the broader DeFi ecosystem.

With the rapid development of the BTC ecosystem last year, we anticipate that BTCFi will be a rapidly growing sector, and Orion may have strong growth potential through its cross-chain bridge product.

4.3 Anticipation of Orion Terminal Airdrop

In September 2020, Uniswap announced an airdrop of its governance token UNI. All Ethereum addresses that interacted with Uniswap V1 or V2 before the airdrop deadline were eligible to receive at least 400 UNI.

Combining Uniswap’s airdrop history and successful experience, if Orion Protocol considers executing a similar airdrop strategy, we can anticipate several potential growth points and positive effects, including but not limited to attracting new users, promoting community governance and user engagement, increasing project exposure, acquiring new partners, obtaining valuable user feedback, and promoting its own technological improvements.

5. Tokenomics

5.1 Token Allocation

5.2 Token Utility

5.2.1 Staking & Governance

Orion Protocol’s Governance 2.0 represents a fundamental change in its governance mechanism, aiming to build a resilient future by enhancing community interaction and influence. It establishes a reward commitment to ensure that each participant can contribute to Orion’s long-term success. At the core of Governance 2.0 is the introduction of veORN (Vote-Escrowed ORN), a non-transferable token representing the ORN tokens locked by users, equivalent to their voting power and influence within Orion.

In the initial stage, veORN is primarily used for voting in liquidity pools, but its design is flexible and may expand to new governance capabilities as the Orion ecosystem develops. The veORN mechanism encourages users to increase their participation and influence in Orion’s governance by locking ORN for an extended period, reinforcing community control over the platform’s development direction.

Users obtain veORN by staking ORN and selecting a lock-up period, further engaging in Orion’s governance process. The choice of the lock-up period reflects the depth of a user’s commitment to Orion governance, with longer lock-up periods resulting in more veORN and increased influence in governance decisions. This mechanism aims to reward users with long-term commitments to the Orion ecosystem, ensuring that rewards are proportional to the level of user participation and commitment through a carefully designed incentive system.

Additionally, the introduced veORN decay mechanism in Governance 2.0 aims to incentivize continuous user participation in Orion’s governance. Over time, veORN that has not undergone additional staking or lock-up period extensions will gradually decrease, requiring users to increase ORN staking or extend lock-up periods to maintain or enhance their influence in governance. This design ensures the vitality and fairness of the Orion governance ecosystem, encouraging new users to participate while rewarding existing users for long-term and active engagement.

5.2.2 Reward Mechanism

As part of the Refer & Earn program incentives: Fee generation from referees (weighted at 70%) and user’s ORN balance (weighted at 30%). A higher ORN balance can significantly increase the received rewards.

6. Risks

6.1 Security Risks of Cross-chain Bridge Technology

Cross-chain bridge projects in the DeFi space carry elevated risks, including security vulnerabilities and operational risks. As a cross-chain bridge project, Orion needs to prioritize these risks and implement appropriate security measures and risk management strategies to safeguard user assets and enhance community trust.

6.2 System Integration Risks

The Orion Protocol integrates multiple decentralized and centralized exchanges to provide its unique liquidity aggregation services, involving complex system integration work. While this integration offers users extensive liquidity access and an optimized trading experience, it also introduces system integration risks.

These risks may include technical compatibility issues, where APIs and data formats from different platforms may differ, requiring meticulous adjustments and adaptations to ensure seamless integration. Additionally, maintaining the stability and reliability of these integrations is a challenge, as updates or failures on any one platform may impact the entire system. This strategy of high dependency on external platforms may be subject to policy changes or service interruptions from these platforms.

Therefore, despite the significant advantages that system integration brings to Orion, such as increased liquidity and improved user experience, it also demands ongoing efforts from Orion to manage and mitigate these integration risks, ensuring the platform’s stability and security and protecting user interests from potential impacts.

Disclaimer：

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