A Linear Exchange is a decentralized exchange (DEX) that, unlike centralized exchanges, doesn't rely on traditional order books. Instead, users trade directly with the exchange's smart contracts, which are backed by a debt pool.
This model offers some key differences compared to order book-based exchanges:
- No Order Books: Transactions aren't matched based on buy and sell orders placed in an order book.
- Smart Contract Interaction: Users interact directly with smart contracts to execute trades.
- Debt Pool Backing: A debt pool provides liquidity, allowing users to trade against it. This debt pool is typically managed by a system involving staking of the platform's native token.
In simpler terms, imagine a traditional stock exchange where buyers and sellers place orders, and the exchange matches those orders. A Linear Exchange operates differently. You're not buying from or selling to another individual; you're interacting with a pool of assets that is maintained by the platform itself. The platform's smart contracts manage this pool to ensure there is always liquidity available for trading.
This design aims to provide faster and potentially more efficient trading by eliminating the reliance on matching individual orders.
