The Decentralized Future of Tokenized Asset Trading — Why We Funded Paradigm
Meet Paradigm, the talented team building the DEX protocol layer.
DRF is excited to announce our investment in Paradigm, a decentralized order relay protocol and platform. Paradigm is building the foundation for an adaptable, open, and efficient global marketplace enabling redefined financial instrumentation.
If that sounds complex, it’s because they’re solving a technically challenging problem in a fast-moving industry using new technology. We’ll provide some context below for why this is a problem worth solving and how they plan to do it.
Why does decentralization matter?
As the trading of tokenized assets has become more accessible and trading volumes have risen, buyers and sellers have gravitated towards easy-to-use exchanges like Coinbase, Binance, Bittrex, and others. These exchanges are user-friendly and convenient: by managing both an individual’s’ tokens as well as their private keys, centralized exchanged remove the headache of handling token security. And because the majority of global trading happens on centralized exchanges, liquidity is high on these platforms: buyers and sellers can transact easily.
Largely in response to these concerns, decentralized exchanges (sometimes called DEXs) have grown in popularity. While each of these DEXs sits on top of the Ethereum network, they don’t talk to one another. Each DEXs has its own ecosystem: web apps, APIs, and liquidity pools.
As a result, buyers and sellers on a given exchange cannot trade with buyers and sellers on a different exchange. This liquidity fragmentation inhibits scaling and creates market inefficiencies.
What’s the solution? Paradigm’s decentralized exchange stack!
Enter Paradigm. Paradigm aims to merge the best of both worlds: the security of a decentralized exchange with the liquidity and efficiency of a centralized exchange.
Paradigm’s protocol sits between exchange interfaces and existing settlement logic (like 0x and Dharma). By allowing exchanges and traders to access to a single, global liquidity pool, Paradigm helps to create a more efficient market.
For developers, Paradigm is highly customizable: settlement logic built on the platform can represent spot exchange, derivatives, loans, and much more.
Why DRF invested
There’s a lot to like about Paradigm. But if we had to pick just three reasons why we invested, we’d point to the following.
- Bold vision: Paradigm is more than a platform. By building its protocol layer atop existing decentralized exchanges, the team plans to realize its vision of a new age of smart-contract-based financial instruments with access to a global liquidity pool. We like Paradigm’s huge, audacious vision — even better, we believe this is a team that can make good on that vision.
- Putting developers first: By empowering developers to build on top of the platform, Paradigm gives them the tools to do things like implementing custom settlement logic or earning fees for custom financial instruments based on usage volume. We believe that platforms that work to not only attract great developers, but also align their interests with those of end users can create a powerful flywheel: developers building great apps and tools brings more users, and more users brings more developers.
- Team: Liam Kovatch (CEO) started a Bitcoin mining operation in his childhood bedroom five years ago. By our accounting, five years experience in crypto makes you an industry veteran. Like Liam, the rest of the Paradigm team is deeply experienced and devoted to the space. Henry Harder (CTO) is a founding member of Blockchain @ Columbia; Stephen Fiser (Lead Dev) is a skilled Solidity developer, having brought multiple blockchain projects to market; Thomas Aslanian (CIO) has worked on enterprise-level innovation ventures at PwC. We could point to many more of this team’s accomplishments, but the point is clear: this is a supremely talented group with deep experience and a demonstrated passion for the space.
Paradigm exemplifies so much of what we love about Dorm Room Fund: we get to back incredible student founders with huge visions in at the frontier of fast-moving industries. We’re thrilled to back this team and look forward to following along as they continue to build and innovate.