Thread by @jump_

1/ CLOBs have been TradFi's backbone for decades, but on-chain they create new problems: latency arbitrage, MEV, toxic flow, and higher costs for traders.

The ecosystem needs better market structures.

Enter: Dual Flow Batch Auctions (DFBA).

2/ Every DeFi exchange design has evolved around blockchain constraints. AMMs unlocked permissionless trading but introduced slippage and sandwich attacks. Batch auctions addressed MEV but fragmented liquidity and slowed execution.

3/ On-chain CLOBs brought familiar order books but imported TradFi's latency arms race. The fundamental issue: continuous matching with time priority incentivizes speed competition that redistributes value rather than creating it for genuine traders.

4/ DFBA changes the game mechanics. Two parallel auctions every 100ms. Makers compete to serve takers, not each other. Everyone fills at a uniform clearing price. Order arrival time becomes irrelevant.

5/ The constraint is physics. Current CLOB designs create microsecond competition that adds no economic value for traders. Batching at 100ms intervals makes price volatility due to latency negligible.

6/ For makers: reduces exposure to toxic flow and levels the playing field through uniform pricing. No more getting picked off by stale quotes. Pro-rata allocation at clearing price rewards better pricing and size, not speed.

7/ For traders with real economic needs: Tighter spreads and deeper liquidity without the hidden MEV tax. The system serves hedgers, investors, speculators—anyone trading for external reasons.

8/ DFBA volume represents genuine economic activity. No more maker-vs-maker or scalper-vs-maker. Fee structures can align directly with value delivered to end users rather than subsidizing latency competition.

9/ The design inherits the best of its predecessors: continuous liquidity provision, auction-based fairness, and granular price expression—while avoiding their worst trade-offs like fragmentation, MEV vulnerability, and speed games.

10/ DFBA focuses on competition where it creates value: price and size, not time.

Read more at our blog: jumpcrypto.com/writing/dual-f…