If the NYSE let a single hedge fund control which trades hit their order book and in what order, it would violate every principle of fair markets. This is the current state of decentralized exchanges—and it's costing users billions.

Centralized exchanges maintain complete control over their trading pipeline: their API servers gate which orders enter the system, their order books track pending trades, and their matching engines determine how orders are paired and settled. The exchange has control at every step.

Decentralized exchanges, while implementing robust rules for trade execution, face a critical weakness: they have no say in which transactions are included in blocks or how they're ordered. Proposers hold this power, repeatedly auctioning it off to the highest bidder—typically sophisticated trading firms who can extract the most value. This control over transaction ordering—akin to letting a third party buy the right to manipulate the sequence of trades in a centralized exchange—creates enormous opportunities for value extraction.

The cost of this broken structure is staggering: since The Merge, over $1 billion has been extracted from DeFi users. Liquidity providers have lost more than $750M to arbitrageurs, while sandwich attacks have cost traders over $330M—all because applications can't control how their transactions are ordered and included.

Enter Angstrom: Taking Back Control

Built on Uniswap V4, Angstrom introduces a new exchange model that puts applications back in control of their transaction ordering. By enforcing rules at the application layer, we've created a system that aligns the incentives of all market participants.

Protecting Liquidity Providers

Existing DEXs leave liquidity providers exposed to constant arbitrage from sophisticated traders who exploit price differences between centralized and on-chain venues. This "loss versus rebalancing" (LVR) drains hundreds of millions from LPs annually.

By holding its own MEV auction in an app-specific mempool, Angstrom redirects arbitrage competition to benefit adversely-selected LPs. Instead of paying builders and proposers for priority, arbitrageurs must bid directly to LPs for the right to arbitrage. This competition ensures value flows back to liquidity providers instead of being captured by block producers. In practice, this means:

• Sustainable On-chain Liquidity: For the first time, LPs retain their value when prices move instead of losing to arbitrage

• Efficient Protocol Incentives: With LPs profitable through trading fees alone, protocols can incentivize liquidity with lower subsidies

• Tighter Spreads and Competitive Liquidity: Baseline profitability will incentivize LPs to compete with each other via dynamic strategies, resulting in tighter liquidity spreads for users and furthering the amount of on-chain liquidity and potential for price discovery on decentralized venues.

Protecting Swappers

While other DEXs process trades one by one, leaving users vulnerable to sandwich attacks; Angstrom executes all user trades in a block at a uniform price. This not only eliminates sandwich attacks but also fundamentally transforms the trading experience.

Traditional DEX trading comes with significant frictions. Angstrom removes these barriers:

• No ETH Required: Pay for gas in the token you're trading—if you're swapping USDC, pay in USDC.

• No Priority Fees: All trades in a block are treated equally, so you’ll only pay a priority fee if the block is full.

• Dramatic Gas Savings: Average swap costs are 50% lower than Uniswap V3 swaps.

• Lower Trading Fees: Protected from toxic flow, LPs can offer more competitive fees.

How It Works

Angstrom achieves these benefits through a fundamentally different architecture to existing on-chain applications. To understand how, let's first examine why traditional DEXs struggle with these issues.

Traditional DEXs: Operating in a Vacuum

A traditional AMM like Uniswap V3 is a smart contract holding a balanced pool of two tokens. When you trade, you submit a transaction directly to this contract, and it executes your swap based on a mathematical formula that determines the exchange rate. The problem? These AMMs operate in a vacuum—they only update prices when someone trades against them.

This disconnect from real-world prices creates a problem. When prices change on centralized exchanges (where most price discovery happens), the AMM's price stays the same until someone trades against it. This gap creates a profitable opportunity for arbitrageurs who can buy from whichever venue has the lower price and sell where the price is higher.

While arbitrage itself isn't bad, it helps markets stay efficient, the captured value is improperly distributed. In current DEXs, sophisticated traders extract this value from liquidity providers while paying hefty bribes to block builders and proposers to ensure their transactions execute first.

Angstrom: A New Kind of DEX

Angstrom fundamentally rewires how decentralized trading works through application-specific sequencing. Instead of users trading directly with a smart contract, all trading activity flows through the Angstrom network—a decentralized node network with open-source, verifiable logic for sequencing and executing trades.

This new architecture is built on two key components:

• Protected Liquidity Pools: Our pools run on Uniswap V4, secured by an Angstrom hook that ensures only staked Angstrom validators can execute swaps. All funds remain in the Uniswap V4 contract, and liquidity providers maintain direct, trustless access—they can deposit and withdraw directly from Uniswap at any time without going through the Angstrom network.

• The Angstrom Network: A decentralized network of staked validators that enforce Angstrom's sequencing rules through an application-specific consensus protocol. Angstrom leverages EigenLayer's restaking infrastructure for crypto-economic security. Validators stake ETH through EigenLayer, which can be slashed if they break protocol rules—creating powerful incentives for honest behavior.

Here's how a trade moves through this system:

1. Send Your Order: Send a signed limit order to an Angstrom node.

2. Order Gossip: Your order is validated and broadcast to all Angstrom validators.

3. Bundle Creation: A randomly selected leader combines all orders into an optimized transaction bundle according to Angstrom’s sequencing rules and optimistically submits it to the Ethereum mempool & block production pipeline for inclusion.

4. Settlement: The bundle is executed on Ethereum, all user limits are enforced by the smart contract on-chain.

5. Validation: Angstrom’s validators verify, post execution, that the leader’s bundle respected the sequencing rules.

Understanding Angstrom's Bundle

When the leader creates that "optimized transaction bundle," two distinct auctions work together to handle different order types: arbitrage orders (with bids for trading rights) and limit orders.

The Arbitrage Auction: Redirecting Value to LPs

The mechanics are simple:

1. Angstrom runs a english auction for each pool at the start of every block.

2. Arbitrageurs bid for exclusive rights to execute a fee-free trade, ensuring pools can fully align with the price on exogenous venues with deeper liquidity.

3. The winning bid for each pool executes their fee-free swap & their bid is distributed pro-rata to liquidity providers.

Rather than trading firms competing as block builders, bidding for entire blocks to secure their arbitrage trades, Angstrom breaks this winner-takes-all system into individual pool auctions. This lowers barriers to entry and drives competitive bidding—traders can now target specific opportunities without needing the capital and infrastructure to arbitrage the entire market. More competition leads directly to higher bids, returning more value to liquidity providers.

Batch Auction

Once the arbitrage auction aligns pool prices with the market, Angstrom runs a batch auction to settle all limit orders. Here's how it works:

1. The matching engine combines two sources of liquidity:

   • Off-chain limit orders from traders and market makers

   • On-chain AMM liquidity from the pool

2. It constructs supply and demand curves:

   • The supply (ask) curve represents all sell orders and available AMM liquidity

   • The demand (bid) curve represents all buy orders and available AMM liquidity

3. The matching algorithm finds the exact price where supply meets demand—the uniform clearing price

4. All trades in the batch execute at this single price

Unlike batch auctions like CowSwap that select a single solver's solution for the entire batch, Angstrom treats all orders and AMM liquidity as part of a unified orderbook. This means multiple market makers and solvers can provide liquidity in the same batch—their orders are simply integrated into the supply and demand curves alongside the rebalanced pool liquidity. This unified approach combines liquidity from all participants, leading to more competitive markets and better execution for users.

Timeline

Sorella Labs is leading the development of Angstrom. With our first Spearbit audit and Cantina audit competition complete, we’re on track to launch shortly after Uniswap V4 goes live.

In the meantime, you can stay up-to-date with Angstrom’s development by following our Twitter.

Integrations

If you're a liquidity provider, market maker, solver, router, or protocol developer interested in integrating with Angstrom, please fill out our interest form to apply for early access or connect with our team.