Crypto order exchange

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Overview

This guide demonstrates how to implement a secure and efficient cryptocurrency order exchange system with the Blnk Ledger. You’ll learn how to handle order creation, escrow management, order matching, and atomic settlements.

A cryptocurrency exchange operates in three main steps:

• Order Creation: Users express their intent to trade by creating orders
• Order Matching: Compatible orders are paired together
• Settlement: Assets are exchanged atomically between parties

To illustrate this flow, let’s work with a practical example where two users want to exchange different cryptocurrencies:

Initial State:
John has 1 ETH available in his account
Emily has 10 MATIC available in her account

Order Intent:
John wants to receive 10 MATIC in exchange for 1 ETH
Emily wants to receive 1 ETH in exchange for 10 MATIC

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Designing your map

Before writing code, it’s crucial to design a money movement map that outlines how money moves in your system. This serves as the blueprint for your implementation.

For our order exchange system, here’s how funds will flow:

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Step 1: Order creation

Each customer initiates their order by starting a transaction in an inflight state, temporarily holding their assets (e.g., ETH or MATIC) in escrow (@ETH_Escrow or @MATIC_Escrow) until the order is matched or finalized:

1. John deposits ETH into @ETH_Escrow (inflight).
2. Emily deposits MATIC into @MATIC_Escrow (inflight).

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Step 2: Order matching

Order matching occurs when the system pairs John’s inflight ETH transaction in @ETH_Escrow with Customer B’s inflight MATIC transaction in @MATIC_Escrow, linking them under a shared . This step confirms compatibility and prepares the orders for settlement, keeping funds securely held in escrow until the final exchange.

1. John’s ETH in @ETH_Escrow matches Emily’s MATIC order (and linked by a root id: root_id_123).
2. Emily’s MATIC in @MATIC_Escrow matches John’s ETH order (and linked by a root id: root_id_123).

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Step 3: Order settlement

1. Inflight MATIC transaction to @MATIC_Escrow commits and settles to John’s MATIC balance. The settlement transactions are linked to matched orders with the root_id.
2. Inflight ETH transaction to @ETH_Escrow commits and settles to Emily’s ETH balance. The settlement transactions are linked to matched orders with the root_id.

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Prerequisites

Before starting, ensure you have:

1. A running Blnk server instance (e.g. at http://localhost:5001).
2. An API key for Blnk (replace YOUR_API_KEY in the code examples). Required for authenticated requests.
3. The Blnk CLI installed or a connected Blnk Cloud workspace to view your ledger data.

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Setting up your ledger

Before implementing the exchange logic, we need to establish the foundational structure in your Blnk Ledger. Let’s set up separate ledgers for each cryptocurrency and create the necessary balances:

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Create customer ledgers

Create two ledgers to segregate different cryptocurrencies:

const ethLedger = await Ledgers.create({
  name: "Customer ETH Ledger"
});

const maticLedger = await Ledgers.create({
  name: "Customer MATIC Ledger"
});

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Create customer balances

Create balances for both users in each ledger:

// Create ETH balances
const johnEthBalance = await Balances.create({
  ledger_id: ethLedger.id,
  currency: "ETH"
});

const emilyEthBalance = await Balances.create({
  ledger_id: ethLedger.id,
  currency: "ETH"
});

// Create MATIC balances
const johnMaticBalance = await Balances.create({
  ledger_id: maticLedger.id,
  currency: "MATIC"
});

const emilyMaticBalance = await Balances.create({
  ledger_id: maticLedger.id,
  currency: "MATIC"
});

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Fund the initial balances

// Fund John's ETH balance
await Transactions.create({
  amount: 1, 
  currency: "ETH",
  reference: `ref_${uuidv4()}`,
  precision: 100,
  source: "@ETH_FundingPool",
  destination: johnEthBalance.id,
  description: "Initial ETH funding",
  allow_overdraft: true
});

// Fund Emily's MATIC balance
await Transactions.create({
  amount: 10,
  currency: "MATIC",
  reference: `ref_${uuidv4()}`,
  precision: 100,
  source: "@MATIC_FundingPool",
  destination: emilyMaticBalance.id,
  description: "Initial MATIC funding",
  allow_overdraft: true
});

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Phase 1: Order Creation

When John or Emily creates an order, we need to:

1. Confirm that they have sufficient funds to successfully place the order.

   Copy

   async function checkBalance(balanceId: string, amount: number) {
     const { Balances } = blnk;
     const balance = await Balances.retrieve(balanceId);
     const availableBalance = balance.balance - balance.inflight_debit_balance;
     
     if (amount > availableBalance) {
       return { success: false, message: 'insufficient funds' };
     }
     return { success: true, availableBalance };
   }
   

2. Initialize it via inflight on your Ledger and reserve the funds in escrow until the order is matched or canceled.

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   async function createInflightTransaction(balanceId: string, amount: number, currency: string, receiveCurrency: string) {
     const orderReference = `order_${uuidv4()}`;
     const { Transactions } = blnk;
     
     const inflightTx = await Transactions.inflight.create({
       amount: amount,
       currency: currency,
       precision: 100,
       source: balanceId,
       destination: `@${currency}_Escrow`,
       description: `Exchange order: ${currency} to ${receiveCurrency}`,
       reference: orderReference
     });
     
     return { inflightTx, orderReference };
   }
   

3. Record in our order book.

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   async function recordOrder(orderReference: string, sendCurrency: string, receiveCurrency: string, amount: number) {
     const orderBook = {
       reference: orderReference,
       send_currency: sendCurrency,
       receive_currency: receiveCurrency,
       amount: amount,
       status: 'pending_match',
       created_at: new Date().toISOString()
     };
     
     // Store in your order book system
     // This is a placeholder - implement your storage logic here
     return orderBook;
   }
   

4. Bringing it all together.

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   async function createExchangeOrder(
     sourceBalanceId: string,
     amount: number,
     sendCurrency: string,
     receiveCurrency: string
   ) {
     // Step 1: Check balance
     const balanceCheck = await checkBalance(sourceBalanceId, amount);
     if (!balanceCheck.success) {
       return balanceCheck;
     }
   
     // Step 2: Create inflight transaction
     const { inflightTx, orderReference } = await createInflightTransaction(
       sourceBalanceId,
       amount,
       sendCurrency,
       receiveCurrency
     );
   
     // Step 3: Record in order book
     const order = await recordOrder(orderReference, sendCurrency, receiveCurrency, amount);
   
     return {
       success: true,
       orderReference,
       transaction: inflightTx,
       order
     };
   }
   
   // Create order for John
   const johnOrder = await createExchangeOrder(
     johnEthBalance.id,  // John's ETH balance ID
     1,               // 1 ETH (with precision 100)
     'ETH',            // Sending ETH
     'MATIC'           // Receiving MATIC
   );
   
   // Create order for Emily
   const emilyOrder = await createExchangeOrder(
     emilyMaticBalance.id,  // Emily's MATIC balance ID
     10,               // 10 MATIC
     'MATIC',            // Sending MATIC
     'ETH'           // Receiving ETH
   );
   

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Phase 2: Order Matching

When two orders are matched (e.g., John and Emily), we want to link them together with a common matching ID. This helps us track which orders in our Ledger were matched with each other.

async function linkMatchedOrders(transaction1Id: string, transaction2Id: string) {
    // Generate a unique matching ID with 'match_' prefix
    const matchingId = `match_${uuidv4()}`;

    // Update the first order's inflight transaction metadata
    await Transactions.update(transaction1Id, {
        meta_data: {
            matching_id: matchingId,
            matched_with_tx: transaction2Id
        }
    });

    // Update the second order's inflight transaction metadata
    await Transactions.update(transaction2Id, {
        meta_data: {
            matching_id: matchingId,
            matched_with_tx: transaction1Id
        }
    });

    return matchingId;
}

// Example usage when John and Emily's orders are matched:
const matchingId = await linkMatchedOrders(
    johnOrder.transaction.transaction_id,    // John's inflight transaction ID
    emilyOrder.transaction.transaction_id    // Emily's inflight transaction ID
);

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Phase 3: Settling the Matched Orders

Finally, we need to execute the exchange of assets between the matched orders — John & Emily. Here’s how we do it:

1. We need to commit these transactions to move the funds to escrow.
2. Then we create new transactions to move funds from escrow to the respective recipient balances (John’s MATIC balance and Emily’s ETH balance).

async function settleMatchedOrders(
    johnTxId: string,    // John's ETH inflight transaction ID
    emilyTxId: string    // Emily's MATIC inflight transaction ID
) {
    try {
        // Step 1: Commit both inflight transactions
        await Transactions.inflight.commit(johnTxId);
        await Transactions.inflight.commit(emilyTxId);

        // Step 2: Retrieve transaction metadata to get the matching ID
        const johnTx = await Transactions.retrieve(johnTxId);
        const matchingId = johnTx.meta_data?.matching_id || `match_${uuidv4()}`; // Fallback if missing

        const settlementReference = `settlement_${uuidv4()}`;

        // Step 3: Move ETH from escrow to Emily
        const ethTransfer = await Transactions.create({
            amount: johnTx.amount, // 1 ETH 
            currency: 'ETH',
            precision: 100,
            source: '@ETH_Escrow',
            destination: emilyEthBalance.id,
            reference: `${settlementReference}_eth`,
            meta_data: {
                matching_id: matchingId,
                settlement_type: 'exchange'
            }
        });

        // Step 4: Move MATIC from escrow to John
        const maticTransfer = await Transactions.create({
            amount: emilyTx.amount, // 10 MATIC 
            currency: 'MATIC',
            precision: 100,
            source: '@MATIC_Escrow',
            destination: johnMaticBalance.id,
            reference: `${settlementReference}_matic`,
            meta_data: {
                matching_id: matchingId,
                settlement_type: 'exchange'
            }
        });

        return { success: true, matchingId, ethTransfer, maticTransfer };
    } catch (error) {
        return { success: false, error: error.message };
    }
}

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Best Practices

1. Balance Validation: Always verify available balances before creating orders. Remember to consider both actual balances and inflight amounts to prevent over-commitment of funds.

2. Transaction References: Always use meaningful reference prefixes (‘order_’, ‘match_’, ‘settlement_’) combined with UUIDs. This makes it easier to track and audit transactions throughout their lifecycle.

3. Metadata Management: Ensure metadata consistency across all related transactions. The matching ID should flow through all transactions involved in an exchange, creating a clear chain of linked operations.

4. Error Handling: Implement comprehensive error handling at each step. If any part of the process fails, you need to be able to identify where the failure occurred and handle it appropriately.

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Additional Considerations

1. Rate Limiting: Consider implementing rate limits for order creation to prevent system overload and potential abuse. See advanced configuration.

2. Currency Precision: Different cryptocurrencies might require different precision settings. Ensure to use consistent precision value per currency in your Ledger.

3. Escrow Management: Regularly audit escrow accounts to ensure they zero out correctly after settlements. Any remaining balance could indicate failed or incomplete settlements.

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