In the beginning of this year Solana’s congestion on its network caused traders to worry about landing transactions onto chain.
Traders today have an easier time landing deals, but their concern is now centered on the pricing they are getting.
Sandwich attacks are a persistent and difficult-to-solve problem. They involve sophisticated traders taking advantage of price spreads to the detriment of less-sophisticated traders. DFlow, a market infrastructure company and the Solana Swap app put forward an innovative solution when they proposed conditional liquidty. This requires new market intermediaries to separate toxic order flows from non-toxic ones.
DEX traders can set the slippage percentage, or the change in price after the order, when they try to exchange one cryptocurrency for another. Solana sandwich attackers exploit slippage by front-running transactions to artificially raise the price a few basis points before selling the asset right after at a profit — leaving the user with a worse price. Sandwich attackers make up to millions of dollars per day.
DFlow suggests adding a segmenter class to the market in order to distinguish between toxic and nontoxic order flows, as well as limit sandwich attacks.
DFlow’s segmenters will sit in between DEXs and users who send transactions. This allows them to sort the “good” transactions from those that are not. DEXs can charge sandwichers higher fees and everyone else lower fees when they receive the labeled transaction.
Conditional liquidity “doesn’t completely solve sandwiching” DFlow’s founder Nitesh Nitesh said that they can lower the cost by charging a different rate. “The magnitude of sandwich reduction is proportional to the difference in the higher rate for toxic flow and the lower rate for non-toxic flow.”
DFlow has already released a DFlow Aggregator segmenter and Clearpool, a DEX for conditional liquidities.
They are designed to be a marketplace where DEXs, wallets, and order flows can send more orders. The segmenters earn money from the prices they improve.
“Conditional liquidity aligns the interests of retail traders, DEXs and the network — a win-win-win for all parties involved. We expect conditional liquidity to be one of the big breakout trends of 2025,” JR Reed said that Multicoin Capital’s partner, JR Reed who is the DFlow investor, has stated.
Chris Chung of Solana’s swap app Titan said that he believed conditional liquidity would give honest traders better pricing, but he also noted it might be difficult to convince DEXs to accept the new market structure. DEXs will only change their fees when there is enough demand from venues that accept traders’ orders for conditional liquid. However, these venues may also be interested in seeing DEXs implement the feature before they do.
“It becomes a chicken and [egg] problem,” Chung stated in a message, adding that DFlow’s segmenter DEX and its demand questions may have been a part of the reason for DFlow to launch their own segmenter.
Nath said to me: “handful” He declined to name the wallets or apps that have asked about conditional liquidity.
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