Warlock Labs Secures $8M to Revolutionize On-Chain Order Flow

The company received investments from Polychain, Reciprocal, and other backers.

Key Points:

• Warlock Labs has raised $8 million in venture funding.

• The company focuses on using on-chain data for responsible order flow processing.

• Warlock Labs aims to ensure fair trading by proving that order flow submitted to them remains untampered with.

Market-making on-chain trades is both crucial and profitable, but according to the pseudonymous trader Grug, crypto protocols with valuable order flow are failing to maximize their earnings and are missing out on potential profits.

Grug's company, Warlock Labs, recently raised $8 million in venture funding to tackle the issue. The company aims to offer a solution with its proprietary trading firm that leverages on-chain data to ensure responsible order flow processing.

Founded two years ago, Warlock Labs is preparing to enter the intricate blockchain infrastructure that supports trading on Ethereum. In this space, numerous skilled operators pay protocols for the right to process their order flow, which can generate tens of millions of dollars annually.

However, Grug argues there's no assurance these operators are giving protocols a fair deal. The world of maximal extractable value (MEV) opens up multiple avenues for manipulating unresolved trades, which can harm both the protocol and its traders.

"We're developing order flow tools and a system with zero-knowledge guarantees that will allow us to prove, after the fact, that none of the order flow submitted to us—whether from users or searchers—has been altered," Grug explained.

Warlock Labs will initially concentrate on on-chain activities, but Grug sees potential for the business to expand into market-making for centralized exchanges (CEXes) as well. He referenced the recent Binance scandal, where a market maker profited illicitly from MOVE tokens at the expense of traders.

"We're heading toward a future where order flow is key, and proving that you haven’t manipulated it will be just as valuable as receiving it," Grug said. "If you can prove you won't tamper with order flow, more and more people will be willing to submit it to you."

He described Warlock Labs as a "venture-scale business" with Wintermute as its main competitor. Venture capitalists are taking notice, with Polychain Capital leading the funding round, which also included Greenfield Capital, Reciprocal Ventures, Symbolic Capital, Ambush Capital, and TRGC.