The problem EVEDEX ULTIMATE L2/L3 Deposit&Withdrawal system solves

The hybrid exchange known as EVEDEX creates a fully transparent and secure environment, serving as a comprehensive alternative for trading by both retail and institutional users.

Operating on its own Rollup, “Eventum”, and integrated into the Arbitrum Orbit universe, we have placed a strong emphasis on developing a convenient and fast solution for deposits and withdrawals – without delays, additional verifications, and, most importantly, with the elimination of risks associated with insecure bridges.

Elimination algorithm

After extensive discussions and searching for the optimal deposit method, we have decided to use a configuration of FIVE different services. The mechanism works as follows:

1. User authentication on the exchange.
2. Deposit.
3. Selection of network, token, and amount.
4. The Across service checks for liquidity; if liquidity is insufficient, it switches the target network to L1 Ethereum instead of Arbitrum.
5. The Li.fi aggregator provides routes, and users sign transactions from their wallets.
6. The target wallet for funding is specified as our “temporary wallet”, which hasn’t become a “contract” yet.

We cannot deploy the contract in advance, but we can accurately calculate its future address linked to the user's wallet.

7. Using Quicknode Streams, we monitor the receipt of USDT on our "temporary wallets" in the Ethereum and Arbitrum networks.
8. We check the minimum amount (1 USDT), conduct an AML check, and verify the existence of a contract at the address.
9. A special account calls the contract method to transfer funds to the Across or Super Bridge (depending on the network).
10. The user receives the funds in their Smart Account and can start trading on the exchange.

Deposits through a physical card with OnRamper, as well as withdrawals from a centralized exchange, work in a similar manner. Control is transferred to the "temporary wallet" in the Arbitrum network (supported by most exchanges), after which the user’s account is funds.

Challenges I ran into

The trend is that bridges remain a target for hackers due to the significant amounts of funds involved. It is easier to attack a bridge than to hack a complex application.

Among the main security issues of bridges, we can highlight:

– Smart contract vulnerabilities: Most bridges are governed by smart contracts, which may contain bugs or be only partially audited.
– Centralization of validators: If a group of trusted validators is compromised or colludes, they can steal funds or block transactions.
– Lack of sufficient decentralization: Possible manipulation and blocking of transactions by a group of developers.

Additional complexities

In search of a solution, we explored numerous products and, unfortunately, did not find an ideal way to transfer liquidity to our L3 blockchain that meets all of the requirements for user experience and security. This is due to a number of issues:

External Support: EVEDEX is just beginning its journey, and the network is currently not supported by most bridges and exchanges. This means that to deposit funds into our L3, an intermediate network has to be used.
Security: Involving a third party in the process creates risks, as they have the authority to issue tokens on our blockchain. If the third party has a financial incentive or a low degree of decentralization, they can issue any amount of unsecured tokens and use them to acquire tokens from the L1 network.

Fragmentation of Liquidity: The lack of the necessary liquidity volume in the final network for the fastest and most simple cross-chain transfers.

Security of fund storage is one of the most critical challenges in DeFi, and we pay special attention to this in the development of EVEDEX. Products like Superchain, Across, Li.fi, and OnRamper help to promote our hybrid exchange, not only matching but in some cases even surpassing centralized services in terms of quality and speed.