What is Hydro Protocol?

Hydro Protocol is a revolutionary open-sourced framework for building simple and powerful decentralized exchanges.

The open-sourced Hydro framework incorporates:

Professionally audited smart contracts which perform secure token exchange transactions between two or more parties through atomic swap

A rapid, robust order matching algorithm

Developer tools and resources to expedite the creation of decentralized exchanges (relayers)

Hydro is designed for developers looking to build decentralized exchanges without having to deal with the complexity and expense of designing, deploying, and securing smart contracts.

The Hydro Protocol v1.0 smart contract is live on DDEX as of January 1, 2019.

The Hydro Protocol v1.0 Contract

The first version of the Hydro Smart Contract uses an order matching architecture. This architecture utilizes token allowance permissions to facilitate trades without losing custody of their digital assets. Exchanges on the v1.0 contract can offer both limit and market orders.

There are several key differences between Hydro Protocol and existing decentralized exchange protocols. To highlight a few:

Omission of a 3rd party fee token

Transaction fees in a Hydro system are collected via the base token (i.e. WETH, DAI) of each specific trade, rather than a separate protocol token (i.e. ZRX).

Superior for Liquidity Providers

Smart contract level support for asymmetric fees and discounting yields an average of 35 more basis points for liquidity providers*. This promotes more liquid markets, lower spreads, and greater depths that benefit all users.

*Market makers on Hydro based relayers earn maker rebates for providing liquidity. Through rebates and asymmetrical fee structures, makers can actually yield negative trading fees, effectively earning up to 50% of trading fees as profit.

True Matching: Market Orders, No Order Collision, Free Cancellation

Hydro v1.0 could be seen as a clean implementation of 0x’s “matching mode” contracts. By prioritizing order matching on a smart contract level, market orders are seamlessly integrated into existing liquidity, there is no order collision whatsoever, and order cancellation is always free.