DFlow is a decentralized marketplace for order flow that brings open and fair PFOF(payment-for-order-flow) to users and participants in the digital market. With this platform, the sources of retail order flow can sell order flow to market makers through decentralized and permissionless OFAs(Order Flow Auctions). The platform therefore, enables the safe monetization of best-execution that is guaranteed for retail investors. Market makers can participate in DFlow auctions in a manner that eliminates opaque contracts and enforces transparency.
DFlow has recently announced the conclusion of a funding round that yielded $5.5 million in financing. The funding round was led by Framework Ventures, a crypto venture capital firm known for its early entry into DeFi(Decentralized Finance) and blockchain gaming. Other participants in the funding round include Coinbase Ventures, Circle Ventures, Cumberland, WinterMute Ventures, The Spartan Group and Zee Prime. In early 2022, DFlow had managed to raise another $2 million in a seed funding round that was also led by Framework Ventures.
The world of digital wallets and execution of trades is a very complex one. So what exactly does DFlow’s interest in DeFi accomplish for the ecosystem? First, it is important to note that in the current crypto market, retail investors can trade tokens through wallets which generally route the trades to decentralized exchanges and aggregators like UniSwap for execution. The main problem with this strategy is that users have to pay high fees to these AMMs(Automated Market Makers) where the trades are executed. Additionaly, trade transactions receive poor execution quality that is adversely impacted by MEV. Therefore, for wallets to monetize these trades, they must add extra fees and in the process risk losing users to lower-fee alternative in the sector.
DFlow solves this challenge by enabling wallets to add revenue streams by auctioning retail order flow to the best-execution market makers and therefore, ensuring that they users receive the best prices on their trades. With the auctioning strategy, market makers are mandated to quote better prices than the best publicly listed price across major centralized and decentralized exchanges, therefore, creating a healthy competition that lowers prices for the benefit of the users.
The auction framework is ideal that the traditional equity markets where brokerages had the ability to strike deals with market makers for the purpose of selling them order flows they receive form retail investors. The major problem with this framework is the opaqueness that surrounds such deals and creation of uncertainty among the investors.
According to Nitesh Nath, the founder and CEO of DFlow, the firm creates an efficient marketplace for order flows in which the best-execution market makers compete for the right to execute retail investor trade transactions at best prices. This could in turn bring high execution quality that is capital efficient for all involved entities.
