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The status quo

Market makers have long served as the invisible hands of financial markets, solving a fundamental problem: the coincidence of wants. There are three dimensions to coincidence of wants: price, quantity, time. In other words, if you want to buy or sell an asset, you and your counterparty must agree on the price, the quantity to be bought/sold and when the sale will proceed. Traditional orderbook exchanges streamlined this process, enabling market makers to match wants at unprecedented scale and speed. When a trader wants to go long an asset, market makers provide instant liquidity by taking the opposite position. Later, when another trader wants to short, market makers fulfill that order while unwinding their exposure. The short period of time during which the market makers have exposure to the volatility of the asset price is called inventory risk, and in exchange for taking on this risk, they are paid the “spread”.

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The trader becomes the liquidity provider

In a world with smart contracts, is all of this still necessary? Strike introduces a radical reimagining of exchange architecture — one where the trader becomes the liquidity provider. Instead of relying on a separate group of liquidity providers, Strike uses an asynchronous settlement mechanism where winning trades are settled directly by losing ones. A concrete example:
  • Let’s say the first trader ever for a given market creates and closes a profitable trade. Their payout is added to the FIFO payout queue for that market. They get paid out on their position when a losing trade is closed.
  • Conversely, if the first trader ever closes a losing trade, then their margin is added to a treasury that will pay out the next profitable trader immediately.
Since the cumulative PnL of traders on perpetual exchanges tends to trend negatively, we expect the treasury to slowly grow over time and for all profitable traders to get paid immediately. This mechanism manages to completely bridge the quantity and time coincidence of wants on its own. However, it does still need to rely on an oracle for an agreed upon price… for now.

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The cold start problem & $SLP

The main obstacle to successfully launching the protocol is a cold start problem: we need enough volume in a given market such that we can build up the treasury and pay out profitable traders immediately. To solve this problem, the protocol issues SLP directly to traders, an LP token representing a trader’s share of the protocol’s treasury. This token rewards early trading activity, with losing trades minting larger quantities of SLP than winning positions, ensuring all participants benefit from protocol engagement regardless of trade outcomes.

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Why Strike will win

Longer term, why will Strike be the best venue for traders?
  • Significantly better economics for traders: fees that would’ve gone to LPs in a traditional exchange are instead sent to the treasury. This treasury is a) used to pay out profitable traders, b) used to buy back SLP, which was allocated to traders in first place.
  • Any payoff function: In traditional exchanges, constraints are placed to mitigate the risk of a trade “bankrupting” the exchange. Strike embraces this risk and makes it part of the settlement model.
  • Infinite markets: the absence of starting liquidity requirements unlocks genuinely permissionless market creation. Any price feed, any payoff function — if data exists, a market can exist.
Strike fundamentally reimagines how exchanges work. By removing liquidity providers, it creates a fairer, faster, and more powerful marketplace where traders trade directly with each other rather than through intermediaries.