Decentralized Liquidity Pool (DLP)

The Decentralized Liquidity Pool (DLP) is a set of liquidity aggregator smart contracts that aggregates trades across a multitude of exchange platforms and is, essentially, a decentralized and distributed order book. Creation of orders and trades against existing orders occur inside the DLP. Order actions assess multiple market asset prices to provide the quickest and most efficient way of matching trades. This allows DApps and other exchange platforms to utilize this liquidity pool by staking pairs of tokens for an incentive without having to ask permission. Ecosystem benefits include that Lux.network dApps get greater liquidity, and the Lux Protocol benefits from facilitating a larger trade volume.

The DLP order book is stored directly on the LX subnetwork. In the advent that by some catastrophe, the LX block producers were to have 2/3rds compromised by bad actors, the DLP order book could be recreated from scratch. This is done by reading all events, starting from the block when LX was deployed on the blockchain and recreating the order book based on this information. This allows independent exchange implementations to be in sync among each other without having to trust a centralized API maintained by an exchange. In other words, the Lux Protocol treats the blockchain as an append-only log. LUX builds on the architecture that is decades old in database research.