Decentralized-finance protocol DFlow has raised $5.5 million in a financing round led by crypto venture-capital firm Framework Ventures, the project said on Tuesday.

Other investors included Coinbase Ventures, Circle Ventures, Cumberland, Wintermute Ventures, Spartan Group and ZeePrime. DFlow previously raised $2 million in a seed funding round in early 2022.

DFlow is a DeFi protocol that allows market makers to purchase order flow directly from wallet applications, with the guarantee that the market maker will provide execution at the best price. DFlow defines best price as the best public price aggregated against both centralized and decentralized exchanges.

The firm says current crypto trading is costly for retail customers and lacks the execution quality characteristic of traditional equities markets.

“If you look at equities markets, retail investors don’t trade directly on the NYSE (New York Stock Exchange), they trade on Robinhood against market makers, who may hedge on NYSE,” said DFlow founder and CEO Nitesh Nath, who previously worked as a quant researcher at Chicago-based trading giant DRW.

“We’re improving that system in crypto, but the high-level ideas are similar. [The difference is] with the DFlow model, the process by which market makers are selected is decentralized in an open/fair auction and the barriers to entry are drastically lowered," he said.

With stocks, brokerages such as Robinhood Markets (HOOD) strike deals with institutional market makers like Citadel Securities to sell them order flow from retail investors. The practice, called "payment for order flow," came under scrutiny during a House Financial Services Committee hearing on the GameStop (GME) trading frenzy last year.

With the crypto version of that practice, market makers would place bids with wallet applications for the privilege of trading against trades placed through the wallet. DFlow says blockchain technology would bring transparency to the “black box” process of payment for order flow, because the market-maker auctions would be visible on-chain and enforced by smart contracts. It will also introduce an open-source reputation tracking algorithm to score market markers, meaning the public can review the criteria used to select market makers.