> For the complete documentation index, see [llms.txt](https://docs.orderbook.trade/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.orderbook.trade/tech/how-it-works.md).

# How it works

### System Architecture <a href="#system-architecture" id="system-architecture"></a>

Orderbook.trade uses a **Hybrid Architecture** designed to solve the "DEX Trilemma"\
\
Providing CEX-level performance without sacrificing the non-custodial security of a DEX.

### The Problem with Pure Chains <a href="#the-problem-with-pure-chains" id="the-problem-with-pure-chains"></a>

* **On-Chain AMMs**: Too slow (block times) and expensive (gas on every action).<br>
* **App Chains**: Still limited by consensus overhead for every single order cancellation or modification.

### Our Solution:  <a href="#our-solution-off-chain-matching-on-chain-settlement" id="our-solution-off-chain-matching-on-chain-settlement"></a>

#### 1. The Execution Layer (Off-Chain)

This is a high-performance **Golang-Based Matching Engine** hosted on our sequencer nodes.

* **Role**: Maintains the Orderbook state, matches buy/sell orders, manages risk checks (margin), and sequences transactions.
* **Performance**: Capable of processing 100,000+ orders per second with <5ms latency.
* **Safety**: It cannot forge user signatures. It can only match valid orders signed by the user.

#### 2. The Settlement Layer (On-Chain)

This is a set of **Smart Contracts** deployed on the target blockchain (Arbitrum, Solana, Monad, etc.).

* **Role**: Holds user funds (Custody) and verifies the result of the off-chain matching.
* **Process**: The engine submits a compressed "Batch" of trades. The contract verifies the math and updates user balances atomically.

#### 3. The Security Model (Self-Custody)

Your funds are never held by the Orderbook.trade company server. They are strictly held in the **Smart Contract**.

* **Deposit**: You call `deposit()` on the contract.
* **Trade**: You sign an intent `I want to swap A for B`.
* **Withdraw**: You can call `withdraw()` on the contract at any time.

#### **What if the Orderbook goes down ?**&#x20;

We implement an **"Escape Hatch"** mechanism. If the sequencer goes offline or censors your withdrawal request, you can force a withdrawal directly from the Smart Contract after a timelock, guaranteeing you always have access to your funds.

<br>

<br>