Introduction

DFlow is decentralized marketplace that facilitates a market-driven price discovery process for order flow between wallets and a network of institutional market makers. Wallets route order flow to market makers via permissionless order flow auctions (OFAs). In return, wallets receive monetary compensation in USDC and guarantee that all customer orders are executed at the best market prices.

What is order flow? Order flow are marketable orders (e.g. market orders) that originate from in-wallet swap platforms and make up a large percentage of on-chain transactions. A market order is a trade instruction submitted by a user to buy or sell a certain amount of token at the market price (e.g. User A places a market order to sell 1.5 ETH).

Retail traders in current DeFi landscape encounter both high explicit (e.g. LP fees, commissions) and implicit (i.e. slippage) transaction costs. DFlow is built with the understanding that retail traders are first-class citizens. DFlow enforces all trades are executed at the best market prices and incur zero liquidity fee and slippage. In addition, regular price improvements on trades result in meaningful cost savings in the long run.

DFlow is committed to improving both transparency and accessibility of execution data and will collect and publish data as a part of the service offered to wallets and the public.

How the marketplace works

At the core, DFlow is a wholesale marketplace that enables wallets to sell orders in bulk to a network of institutional market makers. Market makers compete for the rights to execute orders by submitting blind bids into order flow auctions, where each auction represents a batch of orders of a specific grade. Market makers price auctions by analyzing the originators of orders and the set of standardized auction parameters. Payments in USDC are sent to wallets in a pro-rata manner as wallets deliver orders.

Wallets use DFlow APIs to route orders submitted by retail traders to DFlow and in return, receive best-execution on all orders and USDC compensation from market makers. Best-execution means orders are executed at the best market prices and as quickly as possible. This also means retail traders are subject to no transaction costs from front-running (i.e. slippage), back-running, and liquidity fees. Depending on the notional size of trades, the total amount of savings per trade can range anywhere from 5-20 bps for liquid token pairs to 100+ bps for illiquid token pairs.