Ellipsis Labs today announced $20 million in Series A funding led by Paradigm with participation from Electric Capital.
The company's debut product, decentralized exchange Phoenix, went live in February 2023, and its public user interface was launched in August last year. The company said in a statement that the funding will help it blend DeFi's accessibility and transparency with the efficiency of traditional markets, while “developing a new financial ecosystem that delivers competitive financial products on high-throughput blockchains. He said he would accelerate efforts to “build a system.”
Decentralized exchanges are peer-to-peer markets where crypto traders trade funds directly without going through an intermediate custodian, but they currently lack the liquidity to rival centralized competitors such as Coinbase, Binance, and Kraken. Masu.
According to DefiLlama data, Phoenix is the fifth largest decentralized exchange, ranked by trading volume over the past 24 hours, with daily trading volume in the hundreds of dollars. The exchange's on-chain limit order book allows market makers to compete on the quality of liquidity, the company said in a statement.
Ellipsis Labs co-founders Eugene Chen and Jarry Xiao pursued careers in high-frequency trading after meeting in middle school. They founded Phoenix after discovering a problem they wanted to solve with DeFi. That is, protocols that always ensure on-chain liquidity cannot compete with centralized exchanges in terms of depth and breadth.
“We believe there is a path forward to building DeFi products that are as good as, or much better than, what exists in centralized facilities,” Chen says.
Phoenix's main focus is not to provide external incentives (additional tokens) to market makers to provide liquidity, and the opportunity on the exchange is what attracts market makers, Chen said. said. luck.
“In most cases, when you put your money into an automated market maker (AMM), you end up losing your money. Therefore, the way these AMMs are able to track your liquidity often helps them make a profit. This is done through incentives for But he says this is not a sustainable system because it requires a constant influx of outside capital to keep the system running. Proving that system replacement is self-sufficient is the “most important thing” the company is focusing on, Chen said.
It added that the raise, which closed earlier this year, will be used to grow the engineering team and continue to innovate on-chain financial primitives.
The team decided to build the exchange on top of Solana due to active liquidity requirements, Chen said. “Blockchain needs to run very fast, so it needs very high throughput and fees need to be very low,” he says. That’s because liquidity providers incur blockchain gas fees every time they place or cancel a limit order.
“We have known and respected Eugene and Jarry for several years and are excited to officially partner with some of the most ambitious and principled builders in DeFi.” Co-founder of Paradigm said Matt Hwang, CEO and Managing Partner. luck In a statement.