Technical Architecture
Overview of Extended Architecture
Extended operates as a hybrid Central Limit Order Book (CLOB) exchange. While order processing, matching, position risk assessment, and transaction sequencing are handled off-chain, transaction validation and trade settlement occur on-chain via Starknet.
Extended is designed to operate in a completely trustless manner, enabled by two core principles:
Users retain self-custody of their funds, with all assets held in smart contracts on Starknet. This means Extended has no custodial access to user assets under any circumstances.
On-chain validation of the trading logic ensures that fraudulent or incorrect transactions, including liquidations that are contrary to the on-chain rules, are never permitted.
All transactions that happen on Extended are settled on Starknet. While Starknet does not rely on Ethereum Layer 1 for every individual transaction, it inherits Ethereum’s security by publishing zero-knowledge proofs every few hours. These proofs validate state transitions on Starknet, ensuring the integrity and correctness of the entire system.
For a deeper breakdown of the core principles that make Extended trustless, see our blog post.
Benefits of Extended Hybrid Model
The decision to adopt a hybrid model for Extended is a strategic design choice aiming to overcome the limitations of both fully centralized and decentralized on-chain order book models:
Challenges with Centralized Exchanges: Traditional centralized exchanges pose risks due to custodial control over user funds, lack of real-time transparency, and susceptibility to trading manipulation.
Challenges with On-chain Order Books: On-chain order books face issues like the risk of front-running and inherent latency from blockchain transaction validation by multiple parties. Fully decentralized exchanges struggle to match the performance of centralized exchanges, which is crucial for liquidity and reliability.
Extended's hybrid model leverages the strengths of both centralized and decentralized components:
On-chain Settlement with Validations and Oracle Prices: Extended settles each trade on the blockchain and on-chain validations of trading logic ensure the prevention of fraudulent or incorrect transactions. Additionally, mark prices sourced from multiple independent oracle providers mitigate the risk of price manipulation.
Off-chain Trading Infrastructure: Off-chain order matching and risk engines, combined with a unique settlement architecture, deliver remarkable performance in terms of throughput, end-to-end latency, and trade settlement. This performance is comparable to centralized exchanges and superior to other hybrid exchanges or decentralized exchanges (DEXs).
Rationale for Using Starknet as a Settlement Layer
When selecting the optimal settlement layer for Extended, we focused on four key criteria:
Security: Starknet stands out as one of the most secure Layer 2 solutions. Recognized as a Stage 1 rollup, it meets critical decentralization and security requirements — as highlighted by Vitalik Buterin.
Performance: With ~2 seconds transaction confirmation time and an average cost user operation as low as $0.000057, Starknet is currently among the most cost-efficient rollups on Ethereum — enabling high throughput at a low cost essential for processing tens of thousands of trades.
Longevity: StarkWare, the inventors of STARKs and the team behind Starknet, has been building cryptographic infrastructure for over seven years. Through multiple market cycles, they’ve demonstrated technical resilience and strategic continuity.
Vision Alignment: Starknet's ambition to become the first Layer 2 to settle on both Bitcoin and Ethereum aligns with Extended's roadmap to build a global unified margin. This will enable Extended to natively support BTC and its yield-bearing wrappers as collateral, marking a significant step toward broader capital efficiency and deeper liquidity.
For more details on Extended Technical Architecture and Safety, please read our blog posts: 'Extended Architecture' and 'Why Safe?'.
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