Ostrich does not function as a liquidity layer like traditional DEXs. Instead, its revenue model is based entirely on Payment for Order Flow (PFOF)—a model widely used in traditional finance and recently adapted for crypto.

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💸 Payment for Order Flow (PFOF)

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What is Payment for Order Flow?

Payment for Order Flow (PFOF) is a revenue model where Ostrich receives compensation for routing user trades to designated execution partners—such as centralized exchanges or market makers. These partners share a portion of the fee with Ostrich for each order executed through the platform.

PFOF became widespread as many brokers transitioned to commission-free trading, relying on payments from market makers for order flow. Today, it remains a key revenue source for many retail trading platforms.

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How Does PFOF Work?

Ostrich is adapting this approach to crypto by integrating with multiple off-chain and on-chain venues (CEXs, MM desks, liquidity providers) and routing user orders in a way that maximizes fill efficiency and earns small per-trade rebates.

Ostrich doesn’t act as a market maker or hold liquidity; it’s a routing and execution interface, collecting small margins via PFOF while focusing on UI/UX, advanced analytics, and trade automation.

When a trader places an order through a broker:

  1. Order Routing: Instead of going directly to an exchange, the order is sent to a market maker or liquidity provider.

  2. Execution: PFOF partners fill the order, profiting from the bid-ask spread or other trading strategies.

  3. Payment: The market maker shares a portion of fee as brokerage for routing the order, providing the broker with a revenue stream beyond commissions.

This process helps market makers maintain liquidity and manage inventory by ensuring a steady flow of orders.

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Potential Benefits

  • Improved Liquidity: Market makers receiving order flow can provide better liquidity and tighter bid-ask spreads.

  • Better Execution Prices: In some cases, market makers may offer prices slightly better than the public exchange’s best bid or offer.

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Benefits of PFOF for Traders

  • Smart routing: Orders are routed to venues that offer tight spreads and high fill rates.

  • No slippage from internal liquidity: Since Ostrich doesn’t maintain its own pools, trades are executed externally where liquidity is deepest.

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Concerns and Mitigations

PFOF has been controversial in traditional finance due to conflicts of interest—e.g., brokers routing orders to maximize fees instead of best execution.

Ostrich mitigates this by:

  • Routing orders based on best fill price and reliability, not just PFOF incentives.

  • Ensuring prices meet or beat market standards like the National Best Bid and Offer (NBBO) equivalent in crypto.

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Example

If you place a market order to buy $1,000 of ETH via Ostrich:

  • Ostrich sends the order to an execution partner (say, Binance or GSR).

  • The partner fills the order and pays Ostrich a fee (e.g., 0.05% of trade size = $0.50).

  • You receive your ETH without paying any explicit fee.

  • Ostrich earns via PFOF without affecting your execution price.

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Why This Works

In crypto, fragmented liquidity and high retail participation create ideal conditions for PFOF-based execution engines. Ostrich monetizes trading intent, not liquidity provision, allowing it to scale without managing capital or inventory.

Over time, Ostrich aims to build institutional-grade order routing, capturing more volume while keeping the platform completely free to use for retail and pros alike.