Introduction

You’ve probably been in a position where you wanted to buy or sell cryptocurrency but couldn’t because of the price fluctuation. It’s common to be led by the unpredictable price to make a purchase or sale, only to find out after you bought more or sold cheaper than you would have otherwise. There is always the sense of FOMO, even if the difference is slight.

Instead of watching the numbers jump around and cloud your thinking, how nice would it be to press the pause button before placing an order and seeing the current price before deciding whether or not to make the trade? If that’s what you’re thinking, Hashflow is just what you’re looking for. You can buy and sell significant cryptocurrency assets across multiple chains using Hashflow’s decentralized exchange. Not only are the quotes executed at the displayed price, but there are no additional commissions or price slippage.

In July 2022, Hashflow got $25 million in funding from many of the top market makers, such as Jump Crypto, Wintermute Trading, GSR, and Kronos Research. Autonomy.Hashflow also airdropped HFT tokens to early adopters on November 7.

What is Hashflow

Hashflow is a Decentralized Exchange (DEX) protocol that was created to integrate multi-blockchain networks to provide interoperability, zero price slippage, no pre-emption transactions, and to address the issue of Maximum Extractable Value (MEV) causing user losses. By connecting their cryptocurrency wallets, users can trade native assets on the Ether, BSC, Polygon, Avalanche, Optimism, and Arbitrum networks. As a result, it is a highly convenient cross-chain decentralized exchange.

In general, decentralized exchanges frequently employ Automated Market Maker (AMM) algorithms to provide market quotes proportional to the assets in the pool. Hashflow, on the other hand, employs its proprietary Request For Quote (RFQ) model, which enables institutional market makers to use a more sophisticated pricing strategy that considers off-chain data, historical prices, volatility, exchange quotes, and other factors to arrive at reasonable asset pricing, rather than being influenced solely by the volume and share of the pool.

RFQ model quotes provide a better user experience for users by avoiding price fluctuations and allowing users to buy and sell at a fixed price during the effective period of RFQ without being preempted by others or interfered with by miners, resulting in transactions at a bargain-basement price. Institutional market makers that provide liquidity do not have to deposit assets in a shared pool and therefore do not have to bear the Impermanent Losses that traditional automated market maker algorithms incur due to price changes.

Development of the Hashflow protocol

Since 2020, the proliferation of automated market maker protocols has catalyzed the explosive growth of Decentralized Finance (Defi), with decentralized exchanges on chains like Uniswap, Curve, Sushiswap, and others processing billions of dollars per day. However, flaws in these automated market maker algorithms have emerged, including capital inefficiencies, high transaction fees, pre-emption, sandwich attacks, and transaction failures during network congestion. Although AMM has undergone many iterations, there is still a need for a perfect solution to overcome all of its flaws.

Given the AMM algorithm’s inherent limitations for quotes, the Hashflow protocol was created in late April 2021, proposing a method of operation that uses RFQ quotes to connect on-chain users with professional cryptocurrency market makers. Users would receive quotes from market makers and trade directly with them without regard for pool proportions or the possibility of other users interfering in the process. If dissatisfied with the RFQ quote, they may reject it without performing.

Varun Kumar, who previously worked as an aerospace engineer at DLR, NASA, and Udacity. He is the CEO of Hashflow and has a Ph.D. in aerospace from Stanford University. Victor Ionescu, who previously worked at Airbnb, Facebook, and Google, graduated from Oxford University with a degree in Computer Science and is now the CTO of Hashflow, is another key member. Vinod Raghavan, a graduate of Columbia University and Columbia Business School, is the Chief Operating Officer of Hashflow. He has held senior executive strategy consulting roles at Morgan Stanley, JPMorgan Chase, Goldman Sachs, and a16z.

Jump Crypto, Wintermute Trading, GSR, Kronos Research, and Autonomy contributed $25 million to the Hashflow protocol’s Series A funding round in July 2022. Coinbase Ventures, Kraken Ventures, Fabric Ventures, Evernew Capital, and Spacewhale Capital are among the other investors, making for a strong lineup.

from Hashflow’s official website

In the year since its inception, Hashflow has expanded its services to Polygon, BNB, Arbitrum, Avalanche, and Optimism. It has enabled Bridgeless cross-chain swaps, with a cumulative total transaction volume of over $1 billion and over 150,000 independent wallets, with steady user growth. Recently, Hashflow launched Hashverse’s decentralized autonomous organization (DAO) and governance platform to promote community engagement.

from Hashflow’s official website

from Hashflow’s official website

How Hashflow works

Automated market maker protocols on decentralized exchanges use fixed algorithms to price assets, most notably the Constant Product Market Maker (CPMM), which uses an X*Y = K algorithm to provide instant price information based on the ratio of X to Y of the two assets in the pool. However, this pricing method has several drawbacks:

1. Inefficient use of funds.

2. Transaction price slippage for large purchases and sales.

3. The problem of jumping the queue to buy or sell first.

4. Because of the Maximum Extractable Value (MEV), the proposed trade order may be tampered with.

5. The liquidity provider has to bear the impermanent losses.

Therefore, although the automated market maker uses a fixed algorithm for quoted buying and selling, it can be surprising to find from the results that every execution of a trade by a user is like gambling, full of various uncertainties, which often end up producing the worst consequences.

So Hashflow shifted the focus away from the market maker algorithm and back to the original nature of trading: “The user asks for a price, the market maker gives a quote, and then both parties complete the trade at the agreed price.” The user knows how the quote is given if the market maker can perform it. The Hashflow team believes that the algorithm is dead, but the market is alive. They firmly believe that professional market makers will know better how to price assets, even if it means taking a crystal ball and using the future forecast price to make a sale. As long as it is accurate and competitive, these professional market makers will give good quotes.

Market makers in Hashflow are responsible for managing their pools of funds, and when a user wants to trade, they ask for a price (Request For Quote). The market maker must cryptographically sign a quote that remains unchanged for the duration of the trade and bears the risk of fluctuations while the selection is active. Since the user trades at a guaranteed price, there is no pre-emption or price slippage.

from Hashflow’s official website

A market maker will want to offer a favorable price to avoid taking losses. However, doing so will make their offers less attractive than their competitors, thereby losing the opportunity to profit from the transaction. In pursuit of their interests and under pressure from competitors, liquidity providers will each develop unique and sophisticated quoting strategies, taking into account many factors rather than just a single algorithm or logic to provide quoting services.

In such a scenario, asset pricing would be more efficient, resulting in a better user trading experience. The user does not need to understand how the price is derived but only needs to compare the quotes of different market makers before executing the trade and then pick the lowest-cost deal. The user does not have to consider whether the market maker is losing money or making money. The market maker himself has to find a way to make a profit to avoid being eliminated from the market. The following is a simple example to illustrate this in practice.

1. A trader requests to sell 10 ETH on Ether (source chain) and buy AVAX on Avalanche (target chain), hoping to get a quote.

2. The market maker provides the trader with a quote and a cryptographic signature.

3. The trader accepts the offer and submits the transaction on Ether, paying 10 ETH.

4. The liquidity pool smart contract performs a security check, transfers the funds from the trader’s wallet to the pool, and initiates the gateway smart contract on the source chain.

5. After the gateway smart contract on the source chain is triggered, the verifier helps validate the transaction and submits the proof to the verifier node on the target chain.

6. The validator on the target chain receives the proof and transfers AVAX to the trader’s wallet on the target chain.

   Features of Hashflow

Due to its straightforward RFQ operation, the Hashflow protocol has several features that traditional automated market maker protocols have been slow to overcome.

1.Zero Slippage

Users can trade with Hashflow at a single price, and once a market maker makes an offer, it cannot be reversed, and users can trust that their trades will be executed at a price shown on the offer sheet. However, in a general on-chain pool, assets are often “more expensive to buy and cheaper to sell,” and the larger the transaction volume, the more the user loses.

2.Bridgeless cross-chain swaps

In the previous example, users directly exchange ETH assets from their Ether wallets to AVAX on the Avalanche chain through a market maker, but without using a cross-chain bridge or paying expensive cross-chain fees. As long as the market maker is good at generating the assets the user wants on another chain, no one cares how this is done.

3.Front-running is impossible, and no extractable value

Generally speaking, when you send a transaction on the blockchain, the miner or verifier node will pack and sort the content of the transaction. Suppose a user finds an arbitrage opportunity by changing the order of the transaction or front-running transaction. In that case, your transaction order may be replaced with a less favorable position and suffer losses. Hashflow protocol transactions are one-to-one cryptographic interactions between users and market makers, with no queuing or asset value taking.

4.No impermanent Losses

In a regular on-chain pool, the liquidity provider is forced to sell assets of higher value and purchase assets of lower value to balance the different asset ratios in the pool due to price changes. Therefore, when the ratio of the pool is severely imbalanced, the liquidity provider becomes the victim of trading real money for air money and suffers an Impermanent loss. The liquidity providers themselves set the quotes of the Hashflow protocol. If the market makers think that the exposure of an asset is too high, they can acquire it at a meager price or even not provide exchange quotes, and their pools can be balanced.

About the HFT Token

The native token of Hashflow is HFT, which is also the protocol’s governance token. The total supply of HFT is capped at 1,000,000,000 (one billion tokens), allocated as follows.

A) 19.32% - Core Team (four-year unlock period)

B) 25% - Early Investors (four-year unlock period)

C) 2.5% - Future Hires (four-year unlock period)

D) 53.18% - Ecosystem Development

To make HFT more decentralized, the Hashflow community and ecosystem partners will own more than half up to 53% of the HFT Genesis supply, and the core team and investors will collectively receive 44% of the HFT tokens. In terms of ecosystem development, this includes partners (18.54%), early member and user rewards (13.08%), future incentive funds (9.54%), market makers to assist Hashflow with initial liquidity (2.52%), designated market maker loans (7.50%), community vaults (1.00%), and NFT project Hashverse rewards (1.00%).

Early adopters of the Hashflow protocol, or those participating in the Hashflow community and receiving an official Hashflow NFT account, will be eligible for HFT token airdrops. In the “Rake the Rewards” event starting December 20, 2021, users who trade with Hashflow or act as market makers, and liquidity providers will receive an airdrop of HFT tokens.

Users who qualify for HFT token airdrops by holding NFT will receive the number of HFT airdrops corresponding to the type of NFT they hold. Visit the official page for a list.

HFT tokens are not automatically transferred to the user’s wallet. They will need to be collected from the Hashflow APP page within the 30-day validity period starting November 7, 2022. Otherwise, the user will lose eligibility to receive the airdrop tokens, and more than 52.5 million HFT tokens have been released from the airdrop.

Image from Hashflow’s official website

About Hashverse

Hashverse is the first cryptocurrency to advocate for a game-like decentralized autonomous organization (DAO) to facilitate community governance. Hashverse is primarily an immersive storytelling universe created by leading Hollywood creative agency Superconductor, and holders of HFT tokens will collectively determine the future of the Hashflow protocol through Hashverse.

The Hashverse is set in an anti-utopian world where ancient cultures and advanced technology coexist, and a centuries-long conflict is coming to an end. Users land on a Renova planet teeming with ancient mossy forests, pristine oceans, precious metal-rich quarries, and sprawling metropolises inhabited by humans and other species from all over the galaxy. It has long been a hub of galactic trade due to its abundant and valuable natural resources.

The HFT tokens pledged by users in the Hashverse universe are used to project health metrics for Hashverse users. To stay healthy in the Hashverse and increase participation, users must constantly adjust the number and duration of their pledged tokens. Hashflow will continue to reward the most active members of the community and encourage people to participate in all activities.

The Hashverse aims to enable inclusive governance in all Web3 communities and allow anyone, whether Defi users, NFT fans, or GameFi fans, to participate and reap the benefits. Hashverse creates an immersive experience for its users by combining various elements, allowing them to unlock and complete quests, collect and trade in-game props and loot, upgrade their characters, and earn token rewards, all while building the future of Hashflow.

Image from the official website

To enter the Hashverse’s metaverse, users must have 5,000 NFTs called Creation’s Coffer, which come from the depths of the planet Renova’s catacombs, where they have lain silent for over 10,000 years before being reintroduced to the light of day, and which the ancients knew were powerful, so they hide it from the wrong hands. The Creation Vault NFT was previously released at a community event. For those interested in gamified governance participation, such as Hashverse, it is available on the Magic Eden secondary market. Creation’s Coffer NFT was sold out at a previous community event, and those interested in gamified governance participation like Hashverse can purchase it on the Magic Eden secondary market.

Conclusion

The most profound takes the simplest form. Hashflow is a classic example of this, as it gets back to basics in trading by avoiding the complicated process of creating market-maker algorithms. The user wants to know the price, the market maker needs to be held accountable for their quote, and both parties must close at a determined price. The entire exchange is solely between the user and the market maker, with no third parties involved.

Although the logic of Hashflow is simple, the fact that it is not tied to an overwhelming framework makes Hashflow extremely flexible. While it is simple for users, quoting by market makers is a complex art. Using the invisible hand and free competition will allow the best market makers and citing algorithms to emerge and even evolve.

In terms of protocol governance, the Hashverse DAO is a bold and innovative experiment combining gaming and NFT elements to launch, and the Hashflow team is currently working on expanding to non-EVM compatible blockchain networks (e.g., Solana, Aptos, Sui) as well as launching structured products including options and ETFs. While Hashflow has proven to work well for blue chip cryptocurrency assets with high liquidity, it will be up to the Hashflow protocol and market makers to extend the success to smaller, less liquid, long-tail cryptocurrency trading markets.