Hashflow: An aggregator for flow down the chain

How to provide sufficient liquidity for the market is a common problem that all trading platforms need to face.

In the traditional order book trading platform, the transaction orders are reported separately by the buyers and sellers, and matched according to the principle of time and price priority in the platform. However, in this transaction mode, some trading pairs with small volume and low quotation are often difficult for the buyer to find the seller or both parties to reach an agreement on the transaction price at the same time. This makes it impossible for either party to buy or sell assets smoothly, resulting in the loss of market liquidity and impeding the smooth conduct of transactions.

In order to solve these problems, the traditional trading platform has gradually established the market maker mechanism in the development. That is, by selecting some institutional traders with good historical reputation and strong financial strength, they actively offer quotations to the market, in order to provide liquidity to the market. To be a market maker, therefore, you have to assume two additional obligations: 1. To always tell the market what prices you can buy and sell; 2. 2. As long as the trader is willing to trade at the quoted price, the market maker must unconditionally complete the transaction.

In order to fulfill these two missions, market makers often need to establish and maintain large pools of capital to be able to meet the trading needs of traders at any time. It is for this reason that market makers relying on traditional trading platforms have become the largest liquidity aggregation center of traditional trading platforms.

The rise of on-chain trading platforms

However, all this has changed with the rise of on-chain trading platforms. At present, the mainstream chain - to - center trading platform is basically built on the Automatic Market Maker (AMM) mechanism, which reduces the market maker's quotation function, but instead by the AMM algorithm to automatically calculate the trading price. Therefore, in the new mode, the AMM trading platform no longer needs the traditional full-function market maker, but only needs the liquidity provider (LP) to continuously provide liquidity support to the platform, so as to maintain the smooth operation of the trading platform.

Since then, total open space (TVL) has become one of the most important indicators to measure AMM trading platforms. According to DeBank, as of June 24, the total transaction volume of on-chain trading platforms has reached $3.96 billion per day, and the total capital lock-in (TVL) volume has reached nearly $30 billion.

The booming on-chain trading platform provides more options for traders. However, at the same time, due to the high transaction costs, user habits are difficult to change and other reasons, many users and liquidity are still retained in the chain of the centralized trading platform. The two trading modes occupy a part of the market share respectively, and develop in parallel for a period of time, which makes the original relatively unified liquid market appear more obvious separation.

Due to the fragmentation of liquidity, the same asset is priced repeatedly in multiple platforms, making it difficult for users to get the best quotation in the whole market in the platform they are accustomed to using. At the same time, different market prices also create a lot of arbitrage space for cross-platform arbitragers. Is there a way, then, that traders on an on-chain trading platform can simultaneously obtain off-chain quotes, thereby reducing arbitrage losses?

HashFlow is currently working to address this issue.

Flow aggregators that transcend on-chain and off-chain Spaces

Hashflow is a decentralized trading platform deployed on the chain, which aims to help on-chain traders directly access the quotes from market makers down the chain. Through the Hashflow protocol, the on-chain trader can obtain the optimal price of the on-chain and off-chain trading platform at the same time, and can make the transaction at the optimal quotation. Of course, the user can also leave this process to the protocol to complete automatically. Hashflow provides users with a built-in order route that automatically selects the best quote for traders.

In addition, when the protocol is used to execute an off-chain market maker's quote order, since the quote for that order is quoted directly by the market maker, the trader is no longer required to pay the AMM's on-chain calculation costs, thus saving a significant amount of gas and further helping the trader reduce the overall cost of the transaction.

In addition, by choosing to trade directly with off-chain market makers in a Hashflow, you can avoid almost all of the problems that AMM mechanisms can cause.

For example, the pre-start trades and sandwich attacks, which are hated by Defi users, cause a lot of losses to ordinary Defi users. But if users choose to trade directly with market makers in a Hashflow, all of these problems can be avoided at all. Users no longer need to understand complex trading curves, and no longer need to consider trading slippages. All they had to do was choose a market maker to quote and wait for the agreement to be executed.

For traditional market makers, the ability to quote on a Hashflow platform is not taken away from them in the same way that it is with an AMM platform. Market-makers can still price transactions in the way they are used to, and use well-established market-making strategies in Hashflows that have been developed over the past century and have been repeatedly tested by the market. The original organizational structure of market makers does not need to be adjusted and the original risk control strategies can continue to be used. The only thing that needs to be done is to compete fairly with the AMM platform for trading quotations, so as to provide better trading experience for traders.

Of course, introducing a centralized market making agency into the on-chain trading platform will indeed bring some centralized risks to the whole system. As a result, Hashflow will gradually reduce the entry steps for market makers, ultimately making Hashflow an admittance-free platform for market makers to quote prices. All market makers willing to participate in on-chain transactions can be easily accessed through HashFlow. Finally, through adequate market competition, traders can get better trading offers and reduce the risk of a single point of failure caused by the failure of any one of the centralized institutions.

Readers familiar with Defi are probably familiar with the on-chain aggregation protocol. Indeed, a Hashflow can also be understood as a flow aggregator. But whereas previous aggregation protocols tended to be limited to the mobility of different platforms on the aggregation chain, the greatest significance of Hashflow is that it extends the scope of liquidity aggregation from up to down the chain. This connects a larger scale of capital, and makes a more beneficial contribution to the improvement of the overall capital efficiency of the industry.

From the above analysis, it can be seen that the innovation of Hashflow directly eliminates the obvious boundary between the two major liquidity aggregation centers, so that capital can flow more freely. This not only enables traditional market makers to obtain more business income, but also provides traders with better transaction prices, reducing the loss caused by arbitrage activities in the whole market. To sum it up in one sentence, we can say that Hashflow is the connecting hub of on-chain and off-chain liquidity, the aggregator of the world's best trading quotes.

Project Latest Progress

The HashFlow project has been recognized by mainstream investors and has now completed a seed round of funding led by Dragonfly and Electric Capital. In addition, Alameda Research, Metastable Capital, Galaxy Digital, Ideo Ventures, Gumi Cryptos, Morningstar Ventures, and others include Balaji Angel investors including Srinivasan, Kain Warwick and Ryan Sean Adams joined the round.

The HashFlow product is not yet fully open, and users need an invitation code to experience the product. Interested users can go to the project website to apply for trial.

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