L2 Overview
Introduction
Sidepit L2 is a Bitcoin-denominated exchange designed for speculating on and hedging the price of US dollars against Bitcoin. By starting with a USD-forwards order book priced in BTC, Sidepit aims to deliver a transparent, efficient, and secure trading environment. This product choice aligns with both market demand and Sidepit’s core philosophy of building from first principles.
Why Start With a USD/BTC Forward?
Liquidity & Volatility: Bitcoin’s robust liquidity and volatility offer fertile ground for day traders seeking price exposure and opportunity.
Natural Hedging Needs: Bitcoin holders often need to manage US dollar exposure. A USD-forwards product serves as a straightforward tool for hedging dollar risk while staying within the Bitcoin ecosystem.
First Principles Design for Price Discovery: Just as Bitcoin was a technical breakthrough, Sidepit applies first principles to solve a different but related problem: achieving fair price discovery while minimizing execution risks and price manipulation. By carefully designing both the technology and the market structure, Sidepit can significantly reduce exploitative behaviors.
Innovating Beyond MEV-Prone Models: Many blockchain-based exchanges suffer from Miner Extractable Value (MEV) and front-running. Sidepit addresses this by introducing a structure that diminishes these advantages. Instead of relying on hope or complexity to deter predation, Sidepit’s foundational design discourages exploitative behaviors from the outset.
A New Paradigm
Sidepit represents a fundamental shift in how exchanges operate—particularly in the world of decentralized trading. By combining the speed and user experience of traditional financial systems with a decentralized limit order book (DLOB), it opens a new path forward.
A Hybrid Exchange Model
At its core, Sidepit utilizes a Decentralized Limit Order Book (DLOB), while still requiring certain trust-minimized conditions for participation:
Controlled Asset Access: To mitigate MEV and ensure orderly price discovery, traders must lock their Bitcoin into Sidepit’s system before trading. Unlike a typical custodial exchange, this locked position is maintained on a decentralized, transparent ledger. While traders do not hold unfettered access to their funds at every moment, this design is essential to preventing front-running and ensuring a fair market for all participants.
Decentralized Limit Order Book: The order book itself is decentralized, operating through open, once-per-second auctions. This structure removes the latency advantages typically exploited by high-frequency traders in TradFi and neutralizes miner or validator advantages that lead to MEV in DeFi markets. By creating predictable, discrete time intervals for order matching, Sidepit ensures that no single participant can gain an undue edge through speed or privileged access.
In blending the proven efficiencies of centralized exchange infrastructures with the fairness and transparency of decentralized protocols, Sidepit sets a new standard for balanced, trustworthy trading environments. The result is a market designed to put price discovery first, ensuring that all participants benefit from a level playing field.
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