Red Black Tree
Understanding how Red-Black Trees optimize orderbook operations and reduce gas costs in the Fixed-Rate Lending Protocol
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Understanding how Red-Black Trees optimize orderbook operations and reduce gas costs in the Fixed-Rate Lending Protocol
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A Red Black Tree is a balanced binary search tree that enables various operations such as data insertion, deletion, and search to be executed with a computational complexity of O(log n). In the context of Secured Finance, each node of this tree represents the Price in the order book, and it is linked to the corresponding Open Orders using a LinkedList, allowing efficient data management and significant gas cost reductions.
Red-Black Trees provide an efficient way to organize and manage orderbook data, significantly reducing gas costs and improving overall protocol performance.
By utilizing the Red Black Tree, the gas cost associated with open order creation and deletion is significantly reduced to O(log n), resulting in substantial gas cost reductions. Moreover, for data updates, it is only necessary to update the target data and its adjacent data, eliminating the need to update the entire dataset and consequently avoiding gas costs proportional to the total data volume.
Secured Finance extends the functionality of the Red Black Tree by introducing a process to Unlink specified nodes. This Unlink operation effectively detaches all the data associated with the subtree rooted at the specified node. As a result, by simply Unlinking certain nodes in the tree, all the data related to matched orders in the market can be removed from the order book.
Within a single order book, there are two separate Red Black Trees for managing Borrowing Orders and Lending Orders separately. This separation allows for more efficient order matching and management, as each tree can be optimized for its specific order type.
Each price level in the orderbook is represented by a node in the Red-Black Tree. Orders at the same price level are linked together using a LinkedList structure, allowing for efficient insertion and removal of orders at a specific price point. When orders are matched, the corresponding nodes can be efficiently unlinked from the tree without affecting the overall structure.
Computational Complexity
Time complexity for insertion, deletion, and search operations
O(log n)
Tree Structure
Type of balanced binary search tree used
Red-Black Tree
Node Representation
What each node in the tree represents
Price level in orderbook
Order Storage
How orders at the same price are stored
LinkedList
Number of Trees per Orderbook
Separate trees for different order types
2 (Borrowing and Lending)
Unlinking Operation
Special operation for efficient order removal
Custom implementation
Rebalancing Threshold
When tree rebalancing occurs
After insertion/deletion
Maximum Tree Depth
Worst-case depth of the tree with n nodes
2×log₂(n+1)
Color Property
Colors used in the Red-Black Tree
Red and Black
Tree Properties
Rules that maintain tree balance
5 standard Red-Black Tree properties
Let's walk through how a new order is inserted into the orderbook:
Alice places a limit order to lend 1,000 USDC at 5% APR in the JUN2025 market
The protocol converts the 5% APR to a price value (e.g., 0.95238)
The system checks if a node for price 0.95238 already exists in the Lending Orders Red-Black Tree:
If it exists: Alice's order is added to the LinkedList of orders at that price point
If it doesn't exist: A new node is created with price 0.95238, and Alice's order becomes the first in the LinkedList
The Red-Black Tree is rebalanced if necessary to maintain its properties
The entire operation has O(log n) time complexity, where n is the number of distinct price levels
Gas cost is significantly lower than if a linear data structure were used
When orders are matched in the orderbook:
Bob places a market order to borrow 2,000 USDC in the JUN2025 market
The system traverses the Lending Orders Red-Black Tree to find the best available rates
It finds multiple lending orders, including Alice's order at 5% APR
After matching, Alice's order is fully filled
Instead of immediately removing Alice's order from the LinkedList and potentially the tree node:
The system marks Alice's order as "unlinked"
The order remains in the data structure but is ignored during traversal
During a later CleanUp process:
If Alice's order was the only one at that price point, the entire node is removed
If other orders exist at that price, only Alice's order is removed from the LinkedList
This deferred cleanup (lazy evaluation) further reduces gas costs
Consider the gas cost implications of different data structures for an orderbook with 100 price levels and 1,000 total orders:
Array-based implementation:
Inserting a new order: O(n) = O(100) operations
Finding the best price: O(n) = O(100) operations
Removing a matched order: O(n) = O(100) operations
Total gas cost for 100 transactions: Approximately 3,000,000 gas
Red-Black Tree implementation:
Inserting a new order: O(log n) = O(log 100) ≈ O(7) operations
Finding the best price: O(log n) = O(log 100) ≈ O(7) operations
Removing a matched order: O(log n) = O(log 100) ≈ O(7) operations
Total gas cost for 100 transactions: Approximately 500,000 gas
Red-Black Tree with Unlinking and Lazy Evaluation:
Inserting a new order: O(log n) = O(log 100) ≈ O(7) operations
Finding the best price: O(log n) = O(log 100) ≈ O(7) operations
Marking an order as unlinked: O(1) operation
Batch cleanup of multiple unlinked orders: Amortized O(1) per order
Total gas cost for 100 transactions: Approximately 300,000 gas
The Red-Black Tree with unlinking provides an 85-90% reduction in gas costs compared to naive implementations.
Red-Black Trees offer several advantages for orderbook implementation:
Balanced Structure: Red-Black Trees are self-balancing, ensuring O(log n) operations even in worst-case scenarios
Ordered Traversal: The tree structure allows for efficient in-order traversal to find the best prices
Memory Efficiency: The tree structure is more memory-efficient than maintaining sorted arrays
Insertion/Deletion Performance: Both operations are O(log n), making them efficient for dynamic orderbooks
Proven Technology: Red-Black Trees are a well-established data structure with known properties and guarantees
While other balanced binary search trees like AVL trees could also work, Red-Black Trees offer a good balance between performance and implementation complexity.
The Unlink operation is a specialized optimization that differs from standard tree deletion:
Standard Deletion: Completely removes a node from the tree, requiring tree rebalancing
Unlinking: Marks a node or order as "unlinked" without removing it from the data structure
Deferred Cleanup: Actual removal happens later during batch operations
Gas Efficiency: Unlinking is an O(1) operation, while deletion is O(log n)
Batch Processing: Multiple unlinked nodes can be cleaned up in a single operation
This approach is particularly valuable in blockchain contexts where minimizing gas costs is critical.
To handle multiple orders at the same price point:
Node Structure: Each node in the Red-Black Tree represents a unique price point
LinkedList Integration: All orders at the same price are stored in a LinkedList attached to the node
Order Priority: Within a price point, orders are typically prioritized by time (FIFO)
Partial Fills: When an order is partially filled, it remains in the LinkedList with an updated amount
Complete Fills: When an order is completely filled, it's marked as unlinked in the LinkedList
This hybrid data structure combines the efficiency of Red-Black Trees for price discovery with the simplicity of LinkedLists for order queuing.
When many orders are matched simultaneously (e.g., during Itayose price discovery):
Batch Processing: The system processes multiple matches in a single transaction
Efficient Unlinking: Orders are marked as unlinked rather than immediately removed
Subtree Unlinking: In some cases, entire subtrees can be unlinked at once
Deferred Cleanup: The actual removal of unlinked orders happens during less time-sensitive operations
Gas Optimization: This approach significantly reduces the gas cost of large-scale order matching
This is particularly important during events like auto-rolling or new market openings when many orders may be matched simultaneously.
The protocol maintains separate Red-Black Trees for each orderbook and order type:
Per-Market Trees: Each market (maturity date) has its own set of Red-Black Trees
Order Type Separation: Within each market, separate trees exist for Borrowing and Lending orders
Recycling: When markets mature, the tree structures are recycled for new markets
Consistent Interface: Despite having multiple trees, the protocol provides a unified interface for interacting with them
Parallel Processing: The separation allows for more efficient processing of different order types
This modular approach helps maintain performance even as the number of markets and orders grows.
