Overview

Go Long or Short Up to 50x Leverage.

How does Drake work?

Drake’s architecture was built to provide traders with the absolute best price, least slippage, and fastest execution time while supporting liquidity providers and Market Makers (MM) with optimal risk-adjusted return and yield. Drake’s Onchain Order Book consists of two layers of liquidity:

1. Fully Onchain Limit Order Book (LOB)

2. Automated Market Maker (AMM)

These liquidity layers execute trades using logic that provides the lowest slippage and best execution price. To do this, trades may be routed through one primary liquidity source or a mixture of the two layers, resulting in optimal price discovery.

Fully Onchain Limit Order Book (LOB)

Drake’s Limit Order Book is filled with limit orders placed by MMs and other traders. When a trader places an order that matches a limit order on the platform, the trade gets executed.

Limit Order Books provide the most efficient trade execution and lowest price spreads. Being fully onchain, Drake’s LOB provides full transparency, solving the manipulation and spoofing threats found on CEXs and perp DEXs with centralized or offchain components.

Automated Market Maker (AMM)

Drake’s Automated Market Maker liquidity is a pool of USDC available for traders to utilize to open trades. The AMM pool serves three main purposes:

• Guaranteed Trade Execution

  • The AMM ensures that trades are executed regardless of open interest in the LOB.

• Token Listings

  • The AMM allows for the listing of longtail assets such as memecoins or other tokens of typically poor liquidity.

• Composability

  • The depth of the AMM pool and its composability via the dUSDC token will lead to greater opportunities for liquidity providers to earn fees and yield, both on the Drake platform and elsewhere in the ecosystem.

Liquidity Logic and Routing

In Drake’s Limit Order Book system, the order book liquidity will serve as the primary source of liquidity. When an order request is made, Drake evaluates the liquidity available in both the order book and the AMM pool to find the best execution price. There are three possible scenarios to route a trade:

1. Full Execution via the Order Book:

   If the order book can fully meet the liquidity demand at the best price, the order is routed to the order book for execution.

2. Execution via AMM Pool:

   If there is not sufficient liquidity available in the order book, the order is routed to the AMM pool for execution.

3. Split Execution Across Pools:

   If both the order book and the AMM pool can provide liquidity at competitive execution prices, the order is split and executed across both pools.

This hybrid approach ensures optimal pricing and efficient execution for all orders.

Revenue Streams for Liquidity Vault

The liquidity vault generates revenue from the following sources:

• Trading Fees: Fees collected when a trader opens a position contribute directly to the vault’s earnings. The default fee when opening a trade is 0.1%.

• Borrowing Fees: Traders pay fees for borrowing USDC from the vault to leverage their trades.

• Trader Losses: When a trade is closed at a loss, the negative PnL is added to the vault’s balance.

Trade Settlements

• Profitable Trades: If a trader closes a position in profit, their PnL is paid out from the liquidity vault.

• Losing Trades: If a trade results in a loss, the liquidity vault retains the negative PnL, increasing its overall balance.