DFlow, a “decentralized” payment for order flow (PFOF) protocol that enables wallets and crypto trading applications to sell their flow to best-execution market makers via open and permissionless auctions, announced that it has successfully raised a $5.5 million funding round led by Framework Ventures, a renowned venture capital firm known for its early entry into decentralized finance (DeFi) and blockchain gaming.
Additional investors “include Coinbase Ventures, Circle Ventures, Cumberland, Wintermute Ventures, Spartan Group, and ZeePrime.” DFlow previously “raised a $2M seed round co-led by Framework Ventures in early 2022.”
In crypto today, retail investors can “trade tokens through wallets, which generally route the trades to decentralized exchanges and aggregators like Uniswap or 1inch.”
In this model, users “pay high fees to these AMMs where the trade executes, and receive poor execution quality adversely impacted by MEV.”
Additionally, wallets monetize these trades “through adding fees, but risk losing users to lower-fee alternatives in the process.”
With DFlow, wallets can “add revenue streams by auctioning retail order flow to best-execution market makers; this ensures that their users receive best prices on their trades, as market makers are required to quote at or better than the best publicly listed price across major centralized and decentralized exchanges.”
Nitesh Nath, founder and CEO of DFlow, said:
“By creating open and transparent auctions for order flow, DFlow creates an efficient marketplace for order flow in which the most talented and best-execution market makers compete for the right to execute retail investor trades at best prices. We think DFlow could finally bring high execution quality and safe monetization of order flow to crypto, benefitting retail investors with the most capital efficient trading, market makers with access to valuable order flow, and wallets with new streams of reliable revenue.”
In traditional equities markets, brokerages strike deals “with institutional market makers to sell them order flow from retail investors.”
In these deals, order routing algorithms “are generally opaque, creating uncertainty among investors about the quality of trade execution.”
Additionally, barriers to entry for access to retail order flow “is high for market makers. Through DeFi, and beginning with crypto markets, DFlow aims to counter these forces; in DFlow’s open PFOF standard, order routing and execution quality become transparent, while competitive barriers to entry drop dramatically allowing the most talented market makers to provide the best execution to retail investors.”
Vance Spencer, Co-Founder of Framework Ventures, said:
“We believe that DFlow has the potential to totally revolutionize the way order flow is handled in crypto. Their innovative model for open order flow aligns interests for wallets, market makers, and retail traders, and we believe it could easily become a standard integration for any serious player in the space”
DFlow plans “to utilize the newly raised funds to further develop and enhance its protocol, expand its market presence, and onboard more market makers and wallets onto its platform.”
Additional individual investors “include Flashbots co-founder Stephane Gosselin, Zerion CEO Evgeny Yurtaev, Squads Protocol Co-Founder Stepan Simkin, Sei Co-Founder Jay Jog, Eclipse Foundation Co-Founder Neel Somani, Skip Protocol Co-Founder Maghnus Mareneck, Benedict Brady, Paul Burlage, John Lantz, Gabriel Tan, and Samuel Berman.”
