1. Introduction

1.1 Liquidity landscape dominated by centralized exchanges

Since 2019, the vast majority of crypto asset market trading activity has been concentrated on a small number of leading centralized exchanges (CEXs). Whether measured by trading volume, user activity, or the deployment of professional capital, CEXs have maintained a dominant position over the past five years.

According to data from The Block and Coingecko, by the end of 2024, the world's top five centralized exchanges (Binance, OKX, Bybit, Coinbase, and Kraken) accounted for more than 92% of spot trading volume and 97% of derivatives trading volume. Among them, Binance's market share as a single platform has consistently remained in the 50-60% range for multiple quarters.

In fact, CEXs possess highly optimized matching engines and account systems, supporting millisecond-level matching, atomic trades, unified margin accounts, and batch order operations, meeting the demands of high-frequency, low-latency, and complex strategy execution. On-chain environments have long struggled to match these capabilities in terms of TPS, transaction confirmation latency, and failure rate control.

Similarly, exchanges like Binance and OKX have implemented systematic market-making incentive systems, encompassing tiered VIP fees, Maker rebates, liquidity scoring mechanisms, and liquidity guidance funds.These initiatives have successfully attracted numerous quantitative teams, arbitrage strategies, and institutional traders with traditional finance backgrounds. As of early 2025, over 85% of high-frequency market-making funds were still deployed within the internal account systems of centralized exchanges, forming a "closed and efficient" professional liquidity ecosystem.

Whether it's the token generation event TGE of a leading project or the financing and trading path for early-stage assets, the listing of a CEX is still considered a strong endorsement. For example, several prominent projects launched in 2024 saw over 70% of their initial liquidity handled by Binance or OKX, with on-chain transactions representing only a small fraction. This created a skewed liquidity structure from the very beginning.

Within this landscape, despite the continued growth of the on-chain ecosystem in terms of user base and transaction volume, it remains a peripheral and supplementary platform centered around CEXs. This is particularly true for scenarios like high-frequency trading, strategic fund scheduling, and cross-asset arbitrage, which demand extremely high execution performance and precise order control. Due to its limited technical architecture and system responsiveness, the on-chain environment struggles to accommodate these liquidity structures. It can be argued that over the past few years, despite offering greater decentralization and more transparent asset custody, on-chain trading has long lagged behind in terms of performance, efficiency, and strategy-friendliness by an order of magnitude.

1.2 New Trend of On-chain Liquidity

While centralized exchanges still hold a dominant position in the market, structural shifts in on-chain liquidity are becoming increasingly evident. With the continued improvement of execution efficiency, the diversification of asset classes, and the increasing compliance and custody risks faced by centralized platforms, more and more professional trading funds are gradually migrating to on-chain environments. A clear indicator of this new trend is the emergence of several professional on-chain trading protocols, which have rapidly attracted significant real-world trading volume and active strategy-driven users.

2024 is widely regarded as the breakout year for this trend to explode. Photon, leveraging its low-latency order book system and professional trading interface deployed on Arbitrum and Base, quickly attracted a large number of quantitative teams. Its daily trading volume exceeded $100 million in the mid-to-late 2020s and has remained stable between $40 million and $80 million at different stages. Meanwhile, GMGN entered the Meme sector through its hotspot capture and high-frequency modular strategy model. By collecting two-way fees, it established a stable protocol revenue stream, becoming one of the very few projects to successfully implement a "trading is profit" model on-chain.

Within the broader professional trading ecosystem, on-chain derivatives protocols such as Hyperliquid, Aevo, and Drift have also significantly expanded their user base, successfully absorbing some strategic funds originally deployed on Binance Futures or Bybit. The profile of active users has gradually shifted from retail-dominated to structured liquidity.

According to data platforms like Token Terminal, annualized fee revenue for these emerging on-chain trading protocols has generally exceeded tens of millions of US dollars, with some projects boasting monthly trading account numbers and transaction frequency approaching those mid-tier CEXs. These examples collectively demonstrate that the on-chain trading market is entering a "prototype maturity phase," meaning not only is liquidity rapidly growing, but more importantly, the participant structure has gradually evolved from early retail users to a strategy-driven, capital-intensive system.

However, despite this clear trend, the on-chain trading ecosystem still has certain limitations. The current lack of a unified cross-chain liquidity coordination mechanism has led to severe fragmentation of funds and transaction paths across multiple chains, making it impossible to build the centralized liquidity capabilities of centralized platforms. Similarly, the trading experience is highly dependent on the single-chain environment, and various protocols have systemic shortcomings in matching efficiency, path optimization, and order response speed. Especially with high-frequency trading, on-chain execution costs, latency control, and failure risks remain far higher than those of CEXs, and strategy deployment lacks stability guarantees.

As a result, there is a clear market demand for a new generation of infrastructure. On the one hand, it must offer the execution performance and liquidity carrying capacity of centralized platforms, while on the other, it must maintain the transparency, composability, and open structure inherent in on-chain transactions. This new market demand also provides a clear roadmap for building professional trading infrastructure with advanced capabilities.

Against this backdrop, BAT is building a set of underlying execution infrastructure that can truly support professional trading behaviors and adapt to multi-chain environments, in order to address the shortcomings of the current on-chain trading ecosystem in connectivity, execution efficiency, and strategic capital carrying capacity, and provide a foundation for promoting the next stage of the on-chain market development.