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An old issue in the perpetual contract market keeps cycling: centralized exchanges are fast, but your funds have to be entrusted to them; fully on-chain DEXs are fine for self-custody, but slow block confirmations, high gas fees, and large slippage make for a terrible experience.
Rails adopts a pragmatic hybrid approach to break this deadlock: the off-chain part uses a high-performance matching engine that can execute orders in sub-millisecond levels, with very low slippage, providing a user experience comparable to CEXs. But the key is the funds—your money is always held in Ink L2 smart contracts, eliminating single point of failure.
The most ingenious part is the settlement mechanism: every 30 seconds, a batch settlement is performed on-chain using a Merkle root combined with zero-knowledge proofs, making the entire process fully verifiable and tamper-proof. This ensures the efficiency of off-chain matching while not sacrificing on-chain security. It effectively combines the self-custody advantages of DEXs with the user experience of CEXs.