Introducing DFlow Research (DRES)

January 17, 2024 Nitesh Nath

Today marks a tremendous milestone in the journey our team began in 2021. We are delighted to unveil DFlow Research (DRES), an applied research organization that studies the behavior of decentralized order flow and builds products that promote fair and transparent markets for the next generation of finance.

Markets are one of the greatest long-standing technological inventions. They are the heart of human civilization, and a monument to our ability to cooperate with one another. Market structure, the design and rules that govern a market, has evolved alongside human civilization. From the ancient local bartering centers, to electronic order books, market structure now advances towards globally decentralized blockchains. With this future in mind, DRES focuses on order flow, the medium by which opinion and intention is expressed onto a market. If markets are the heart of civilization, order flow is the lifeblood.

DRES is driven by a vision of the future in which every market is powered autonomously by decentralized infrastructure. This is only possible through deliberate and sizable effort in building fair and transparent markets on blockchain technology. Blockchains are state automata whose transitions are driven by users creating and submitting transactions, or order flow, to a network of decentralized entities. We believe that blockchain and protocol design is nascent, and the treatment of order flow in these design systems is proportionally nascent. A focused study of the behavior of order flow in a decentralized system is needed, and mindful product building with considerations to these complex interactions is needed even moreso.

We are a group of engineers, researchers, and designers motivated by making decentralized market structure fair and transparent, operating since 2021, and emerging publicly today with a categorical focus on applying deep order flow research to build groundbreaking new market structure products.

We built DFlow in the summer of 2021, one of the first industry-wide forays into studying and product-building around the properties of decentralized order flow auctions. We were driven by an observation that execution quality in DeFi was highly value-extractive for regular users at the benefit of MEV searchers privileged by handshake deals with block builders. Simply trading on a blockchain was risky; in the best case, regular users would get to participate in the promise of decentralized, free, and open finance. In the average case, those same users would be struck by the effects of value-extractive protocol and imperfect blockchain design. DFlow was born out of a need to mitigate these effects; it is an open market for order flow, in which wallets who represent users, could guarantee safe on-chain trading for their users by tapping into a decentralized network of professional market maker liquidity. Safety was enforced by the AdaptiveBBO, one of our novel, groundbreaking, market structure products which defined a notion of a minimum execution quality for users.

As of the end of 2023, users trading through DFlow’s decentralized liquidity are not subject to the risks we observed in 2021. We are excited to continue solidifying DFlow’s role as a market leader in order flow segmentation, with liquidity driven by professional market makers. With the formation of DRES, we begin the next adventure: protecting user order flow in Solana DeFi through breakthrough market structure design specialized for fast networks, powered natively by an evolution in the DFlow protocol.

The formation of DRES represents the culmination of our thinking and exploring the problem surface of decentralized order flow since 2021. We are confident 2024 will be an immeasurably important year for evolutions in DeFi market structure; DRES is excited to operate at the bleeding edge of order flow auctions, MEV, and novel market structure with the strong foundation laid by DFlow, and the incoming products this month.