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CONFIDENTIAL & PROPRIETARY © 2026 Inkwell Finance, Inc. All Rights Reserved. This document is for informational purposes only and does not constitute legal, tax, or investment advice, nor an offer to sell or a solicitation to buy any security or other financial instrument. Any examples, structures, or flows described here are design intent only and may change.
Dagon clears by batch, not by continuous order-arrival sequence. Inside a batch, a single clearing price p★ applies to every fill on both sides. There is no first-mover advantage inside a batch. There is no last-look. There is no maker-taker asymmetry.

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The mechanism

At batch-close:
  1. All submitted schedules (user curves + market-maker curves) are assembled into a SIMD-packed encrypted state.
  2. A tâtonnement (bisection) search runs over the encrypted vector. On each pass, the candidate price is evaluated: aggregate demand at that price, aggregate supply at that price, sign of the imbalance.
  3. The bracket narrows. After a bounded number of passes, it is tight enough that the imbalance is within tolerance.
  4. The midpoint of the final bracket is p★.
  5. Every buy curve at p★ fills up to its curve’s schedule at that price. Every sell curve at p★ fills up to its curve’s schedule.
  6. If any lane would underflow (sell more than its balance, buy more than its credit), the entire epoch reverts. Partial fills are structurally impossible.

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Why uniform price

Uniform clearing price is the market-microstructure primitive that eliminates sub-epoch timing games:
  • No first-mover advantage. The curve that arrived in lane 2 and the curve that arrived in lane 31 fill at the same price. Arrival order inside a batch is irrelevant to fill quality.
  • No last-look. Market makers cannot see the clearing price before committing their curve; the curve is evaluated as submitted.
  • No maker-taker asymmetry. There is no distinction between maker and taker — every participant is a schedule submitter. The fill economics are symmetric.
These are not policy choices. They are structural consequences of the mechanism. A venue that wants to reintroduce any of them would have to abandon uniform clearing.

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Why not continuous

Continuous matching (CLOBs, AMMs) creates two classes of participant: those who can see and react to order flow in real time, and those who cannot. The first class — HFT firms, sophisticated MMs with co-located infrastructure — extracts rent from the second class. This rent shows up as price impact, as sandwich attacks, as toxic flow. For block-size trades, the rent is larger than the saving from being able to react within milliseconds. If you are already slicing a parent order over twenty minutes of TWAP to avoid impact, a ten-second batch window is free. The epoch is not a latency compromise; it is the vessel that makes uniform clearing possible.

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What batching does not close

Epoch-boundary timing. The moment the batch closes is observable. Sophisticated parties can submit near-close to react to pre-close submissions — but any such reaction is also itself a submission, subject to the same uniform clearing. The residual edge is bounded by the sub-epoch time between submission and close, which is a small fraction of the epoch duration. Batch composition inference. The vector size is observable (cipher text counts are public); the notional volume is observable in aggregate after clearing. Fine-grained inference (which curve was whose) remains infeasible, but aggregate demand intensity is not a secret. Cross-venue MEV. If you hedge a Dagon fill on a public CEX, the CEX sees the hedge. Dagon’s encryption ends at settlement; any downstream action in a public venue is visible there. Plan your hedge path accordingly.

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Parameters

Lane count, bisection depth, schedule shape, and per-pass operator count are tuned per deployment to balance latency, capacity, and the FHE substrate’s per-primitive cost. Specifics are tracked internally and will continue to evolve as Encrypt REFHE production substrate lands.