Today, executing trades on-chain sucks. We've all experienced the gas, fees, illiquidity, bad routing, expensive bridging, complex settlement, lack of automation, and MEV. We're used to it. But the reality is that it's terrible.
In traditional markets, institutional participants coordinate order flow to provide better and better execution. They ensure that the more orders there are, the better the market becomes.
Take Citadel. Citadel Securities is the largest executor of trades in the world. Forty percent of the shares traded in the United States will go through their company. And it's because they provide execution-as-a-service — when users place orders on apps like Robinhood, Citadel will execute the trades for them. Citadel even pays millions of dollars for the exclusive right to do this.
This arrangement is good for everybody. Robinhood can focus on building products. Their users get the assurance of trading through Citadel. And through those users' orders, Citadel gets valuable information about the future of the market, letting them offer cheaper trades, more liquidity, and more assets, with less risk, so that more and more people choose Citadel for execution. It's a flywheel.
The way to think about Citadel is as the Amazon of trading," says Spencer Mindlin, a capital markets technology analyst at Aite Group. In an industry that relies heavily on technology, Citadel has forged ahead by playing "a game of scale. You reach a point where it's impossible for others to compete," he says.
Source: How Ken Griffin's Citadel Transformed Financial Markets
Sounds good, one small problem though — Citadel only pays millions, for order flow that makes it billions. The problem with Citadel is the problem with all companies. Once they're the best, they keep the rest. In Citadel's case, they take 90% of the profit for themselves, rather than make the market any better for you.
Well, what if Citadel was a public good?
What if we took their flywheel, and instead of keeping all the profit, we dumped it back into the flywheel? Back to users, keepers, market makers, and protocols, in the optimal way. How hard could we push it? How good could execution get?
Here's what I think -- I think we can push it harder than Citadel. I think we can push our funny little crypto markets into overdrive. We might even help them become what we always wanted them to be — the best way to exchange assets in the world.
Like Citadel, KeeperDAO allows the value of order flow itself to be harnessed, in order to create better markets.
This is Citadel turned inside-out. Nothing is internalized — we have no liquidity of our own, no proprietary statistical models. What we have instead are networks of expert keepers and market makers. Yet with a little game theory, and key technologies in cryptography and coordination design, we can deliver the same results, then push it even further.