Warlock Labs, a company utilizing on-chain data for responsible order flow processing, has secured $8 million in venture funding to shake up the on-chain order flow market.
A company that uses on-chain data for responsible order flow processing has raised $8 million in venture funding.
The firm aims to ensure fair trading by proving that none of the order flow submitted to them has been tampered with. Market-making on-chain trades is mysterious and important – and lucrative, too. The problem, according to pseudonymous trader Grug, is that crypto protocols with valuable order flow are leaving money on the table.
The Problem with On-Chain Order Flow
Crypto protocols with valuable order flow are often left vulnerable to manipulation by savvy operators who offer kickbacks in exchange for the chance to process their order flow. This can lead to detrimental trades and unfair treatment of traders. Grug‘s company, Warlock Labs, is set to enter the complex blockchain pipes that facilitate trading on Ethereum.
Order flow manipulation refers to the practice of influencing market prices through the placement and management of orders.
It involves using various techniques, such as layering, spoofing, and momentum ignition, to create false signals or manipulate market sentiment.
According to a study by the Securities and Exchange Commission (SEC), 75% of trades on major exchanges are executed by high-frequency trading firms, which often engage in order flow manipulation.
This practice raises concerns about market fairness and transparency.
Warlock Labs’ Solution
Warlock Labs will use proprietary trading firm with a focus on on-chain activity. The company aims to build out order flow tooling and a builder with some zero-knowledge guarantees where they can prove after the fact that none of the order flow submitted has been tampered with. This is crucial in ensuring fair trading and preventing manipulation.
Scaling Opportunities
Grug sees opportunities to scale the business to market makers for CEXes (centralized exchanges). He pointed to recent controversy within Binance over a market maker that took illicit profits from MOVE tokens – at traders’ expense. Warlock Labs aims to live in a future where order flow is alpha, and proving you didn’t abuse it is as valuable as actually receiving it.
Investment and Competition
Warlock Labs has caught checks from Polychain Capital, Reciprocal, Greenfield Capital, Symbolic Capital, Ambush Capital, and TRGC. The company views itself as a ‘venture scale business’ with Wintermute as its main competitor. With the recent funding round, Warlock Labs is well-positioned to shake up the on-chain order flow market.
- coindesk.com | Warlock Labs Raises $8M to Shake Up On Chain Order Flow
