Variant: Bitcoin DEX Satflow explained

Author: Derek & Alana Levin, Variant Fund; Translation: Golden Finance xiaozou

We are excited to share that we led the seed round of Satflow, a new DEX for professional traders built on the Bitcoin network.

1. Why Bitcoin? Why now?

Variant has been tracking the Bitcoin ecosystem for many years. Over the past 12 months, we have noticed three potential trends that are in the early stages of spawning a new wave of development experiments and user interest:

(1) Development of new asset forms

For many years, the community has been opposed to building on the Bitcoin base layer, but the public appetite seems to have changed. This is our first time to tokenize directly on Bitcoin. The release of the Ordinals, BRC20s, and Runes standards represents important progress in increasing the amount of productive, fee-based activity on Bitcoin. Each new token standard improves the token trading experience (e.g., Runes are the newest and most fungible of the three standards, and can trade more decentralized USD funds). We believe that experimentation with new asset standards on Bitcoin will continue from here.

(2) Significant Efforts to Make Bitcoin and Its Ecosystem More Programmable

The Bitcoin ecosystem contains nearly $900 billion of potential capital. To date, the limitations of Bitcoin’s scripting language have been considered a core barrier to building expressive applications around that capital. But we are beginning to see some meaningful new attempts to expand Bitcoin’s utility. A core protocol upgrade called OP_CAT is underway that will enhance the ability to build applications directly on L1. Broadly speaking, at least a dozen Bitcoin smart contract layers (colloquially known as “Bitcoin L2”) have received venture capital. These efforts are collectively transforming Bitcoin into a powerful and attractive development platform.

(3) Institutional Adoption and Interest

Institutional adoption and interest has been driven primarily by the launch of Bitcoin spot ETPs. Since their launch in January, ETPs have attracted over $70 billion in new investment. Research shows that owning assets makes consumers more interested in and loyal to these companies when making purchasing decisions. We believe that owning Bitcoin may have a similar effect: as more users begin to hold Bitcoin in their investment accounts, curiosity about what else people can do with Bitcoin will grow. Over time, this will attract more interest and more new users will interact directly on the chain.

The impact of these positive trends is that in the past 12 months, the Bitcoin ecosystem has received more resources, developer mindshare, and user attention than at any time in its 15-year life history.

2. A DEX built for professional traders

As the Bitcoin ecosystem grows, so does the diversity of users. There is now a thriving community of professional traders trading directly on the Bitcoin network. However, product innovation for this group has lagged behind, especially compared to professional tools and exchanges in other ecosystems. The emergence of Satflow has changed all that.

Every transaction in the Bitcoin ecosystem has three core stakeholders: buyers, sellers, and miners.

● Miners want to get as much fee income as possible.

● Sellers want competitive bids and fast execution.

● Buyers want reliable execution, large inventory, and ample liquidity.

Today, many DEXs tend to focus on just one or two stakeholders. Satflow has built a DEX that takes all three into account, and the result is a best-in-class trading experience, especially for professionals and market makers.

Underpinning the Satflow system is an innovation called Memflow. Memflow is an infrastructure that collates and displays real-time memory pool data for buyers on the Satflow interface. It also helps categorize transactions and provides a reliable data stream of key events on-chain, whether it is a new mint, a major transaction, or an inscription creation.

Before Memflow, both buyers and sellers had to wait at least 10 minutes (the length of time it takes for a Bitcoin block to be confirmed) to find out how much an asset sold for. Even for the most dedicated Bitcoin traders, this delay made the Bitcoin trading experience far inferior to the trading experience on blockchains like Ethereum or Solana. Memflow solves this problem and does it in a way that serves all stakeholders. With access to high-fidelity memory pool data, traders on both sides of the order book can trade using unconfirmed assets in the pool. Buyers can see inventory updates instantly and adjust their positions accordingly. Sellers can get a clearer picture of buyers and at what price their assets will be sold. In addition, miners benefit from more fee income from a more active market.

Satflow founders Robert, Alex and Anatolie were fully prepared for the opportunity of a DEX built for professional traders. The three founders were early experimenters of Ordinals in the Bitcoin ecosystem - both as collection creators and active traders. This gave them first-hand knowledge of the challenges facing the existing infrastructure and the respect of traders and developers who are deeply loyal to the broader Bitcoin ecosystem.

For the past six months, their DEX has been in closed beta. They have carefully curated visits from more than 250 Bitcoin traders and fine-tuned many features to provide the best on-chain trading experience. The DEX is now publicly released.