Hashflow: An aggregator of off-chain fluidity

How to provide sufficient liquidity for the market is a common problem faced by all trading platforms.

In the traditional order book trading platform, trading orders are reported by the buyer and seller respectively, and matched on the platform according to the principle of time and price priority. However, in this trading mode, some trading pairs with small trading volume and insufficiently active quotation will often encounter the situation that the buyer is difficult to find the seller, or the buyer and seller are difficult to reach an agreement on the transaction price at the same time. This makes it impossible for any party to buy or sell assets smoothly, which leads to the loss of market liquidity and impedes the smooth transaction.

In order to solve these problems, traditional trading platforms gradually set up market maker mechanism in the development. That is, by selecting some institutional traders with good historical reputation and strong capital strength, they can offer quotations to the market proactively, so as to provide liquidity to the market. Therefore, to be a market maker, you have to assume two additional obligations: 1. 2. As long as the trader is willing to trade at the quoted price, the market maker must complete the transaction unconditionally.

To accomplish these two tasks, market makers often need to set up and maintain large pools of capital that can meet traders' trading needs at all times. Therefore, 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

All this, however, has changed with the rise of on-chain trading platforms. At present, the mainstream chain decentralized trading platform is basically built on the automatic market maker (AMM) mechanism, which reduces the market maker's quotation function, but instead uses the AMM algorithm to automatically calculate the trading price. Therefore, under the new model, the AMM trading platform no longer needs the traditional full-function market maker, but only needs the liquidity provider (LP) to provide continuous liquidity support to the platform, which can maintain the smooth operation of the trading platform.

Since then, total lock-up volume (TVL) has become the most important indicator to measure AMM trading platform. According to data from DeBank, as of June 24, the total transaction volume of the on-chain trading platform has reached $3.96 billion per day, and the total fund lock-up (TVL) volume has reached nearly $30 billion.

The booming on-chain trading platform provides traders with more choice space. But at the same time, due to high transaction costs, user habits are difficult to change and other reasons, many users and liquidity are still retained in the chain of 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 originally relatively unified liquidity market appear to be significantly divided.

The fragmentation of liquidity makes the same asset repeatedly priced in multiple platforms, making it difficult for users to obtain the optimal price of the whole market in the platform they are accustomed to using. At the same time, different market quotes create plenty of room for arbitrage for cross-platform arbitrageurs. So is there a way that traders on an on-chain trading platform could get quotes off the chain at the same time, reducing their losses from arbitrage?

Hashflow is currently working on solving this problem.

Mobility aggregators beyond the on-chain and off-chain space

Hashflow is an on-chain, decentralized trading platform dedicated to helping on-chain traders directly access quotes from off-chain market makers. Through Hashflow protocol, on-chain traders can obtain the optimal price of both on-chain and off-chain trading platforms, and can trade with the optimal quotation. Of course, users can also leave this process to the protocol to automate. Hashflow provides users with a built-in order routing that automatically selects the best quotes for traders.

In addition, when the protocol is used to execute a quoted order from an off-chain market maker, the trader no longer has to pay for the on-chain calculation costs of AMM because the quoted order is reported directly by the market maker, thus saving a significant amount of gas fees and further helping the trader reduce the overall cost of trading.

In addition, by choosing to trade directly with the off-chain market maker in Hashflow, you can avoid almost all the pitfalls of the AMM mechanism.

For example, false start trading and sandwich attack, which are deeply hated by DeFi users, cause a lot of losses to ordinary DeFi users. But all of these problems can be fundamentally avoided if users choose to trade directly with market makers in Hashflow. Users no longer need to understand complex trading curves, no longer need to consider trading slip points. All they have to do is choose a market maker to quote and wait for the agreement to be executed.

For traditional market makers, offering quotes on Hashflow does not deprive them of the right to quote, as it does for market makers on AMM. Market makers can still price trades in the way they are used to, and apply well-developed market-making strategies in Hashflow that have been proven by the market over a century ago. The original organizational structure of the market maker does not need to be adjusted, and the original risk control strategy can continue to be used. The only thing that needs to be done is to compete fairly with the AMM platform for trading quotation, so as to provide better trading experience for traders.

Of course, the introduction of a centralized market-making institution in an on-chain trading platform does bring certain risks of centralization to the whole system. Therefore, Hashflow will gradually reduce the entry steps for market makers, eventually making Hashflow an access-free market maker quotation platform. All market makers willing to participate in on-chain trading can easily access Hashflow. Finally, through sufficient market competition, traders can be provided with better trading quotes to reduce the single point of failure risk caused by the failure of any centralized organization.

Readers familiar with DeFi are probably familiar with on-chain aggregation protocols. Indeed, Hashflow can also be understood as a liquidity aggregator. Whereas aggregation protocols used to be limited to the mobility of different platforms in the aggregation chain, Hashflow's greatest significance is that it extends the scope of mobility aggregation from the on-chain to the off-chain. This connects a larger scale of capital, for the improvement of the overall capital efficiency of the industry, to make a more beneficial contribution.

From the above analysis, it can be seen that the innovation of Hashflow directly eliminates the obvious boundary between the two liquidity aggregation centers, allowing capital to flow more freely. It not only makes the traditional market makers get 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, Hashflow is a connected hub of on-chain, off-chain liquidity and an aggregator of the world's best trade quotes.

Latest progress of the project

The Hashflow project has received acceptance from mainstream investors and has now completed a seed round led by Dragonfly and Electric Capital. In addition, Alameda Research, Metastable Capital, Galaxy Digital, IDEO Ventures, Gumi Cryptos, Morningstar Ventures, and including Balaji Angel investors including Srinivasan, Kain Warwick and Ryan Sean Adams also joined the round.

The Hashflow product is not yet fully open, and users need an invitation code to experience the product. Interested users can apply for a trial on the project's official website.

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