Chapter 1: What Is OnlyDX?

Traditional centralized exchanges (CEXs) suffer from numerous issues, such as custodial risk, opaque trading mechanisms, and the potential for market manipulation. Because user assets are centrally controlled, any security breach or malicious behavior by the platform can lead to losses. In addition, order matching and trade execution on CEXs lack transparency, making it difficult for users to verify fairness and often triggering crises of trust.

By contrast, decentralized exchanges (DEXs) achieve greater transparency through blockchain technology. A DEX’s trade records and order books are fully recorded on a public L1 blockchain, allowing anyone to verify the authenticity and integrity of transactions. This transparency eliminates the possibility of backroom operations that can exist on centralized platforms, ensuring trades are fair and auditable. At the same time, DEXs enable users to control their assets directly through non-custodial wallets, avoiding the risks of handing funds to third-party custodians.

However, this transparency also introduces privacy challenges. Because transaction data on L1 is public, information such as user addresses, amounts, and timestamps can be analyzed and traced. This may expose user identities or link their trading behavior—especially as L1 data analytics tools grow more sophisticated—driving a stronger demand for privacy protection.

An excellent DEX must not only balance transparency and privacy, but also deliver high performance and low cost. High performance means fast confirmation and execution—approaching or matching the experience of centralized exchanges—so users do not miss opportunities during high-frequency trading or market volatility due to latency. Low cost means substantially reduced gas or trading fees, lowering the barrier to entry and attracting more participants to the DeFi ecosystem.

To meet these needs, we designed OnlyDX—an innovative Layer 2 (L2) decentralized exchange built on rollups. The core idea is to record only the necessary state transitions on the L1 blockchain while filtering out redundant intermediate transaction data. This is akin to posting only the “end-of-period balance” to the ledger rather than every single transaction line, thereby greatly reducing L1 storage and computation, slashing costs, and boosting performance. Rollup technology provides high throughput, while zero-knowledge (ZK) proofs deliver privacy—enabling OnlyDX to strike a balanced trade-off among transparency, performance, and privacy.