Decentralised FX Platform Gets Funding as Launch Nears
Posted by Colin Lambert. Last updated: April 27, 2022
Vertex Protocol, a decentralised FX protocol for spot and derivatives trading, has raised $8.5 million in a seed funding round, ahead of its planned launch in Summer 2022.
Investors in the seed round included a number of quantitative trading firms in both traditional and digital finance. Hack VC, a crypto seed fund led by Alex Pack and Ed Roman, and the venture arm of Dexterity Capital, one of the world’s largest crypto-native proprietary trading firms by volume, led the raise. Additional investors include Jane Street and Hudson River Trading as well as, GSR, Huobi, Collab+Currency, JST Capital, Big Brain and Lunatic Capital.
As part of their investment, Dexterity Capital and a number of other trading firms will also become strategic partners to Vertex, advising on tokenomics, market structure and providing high-frequency trading resources.
Vertex says it aims to address a growing need for multi-currency DeFi applications and on-chain FX trading. Currently, the vast majority of DeFi liquidity is concentrated in dollar-denominated stablecoins. While non-USD stablecoins exist, the absence of a viable protocol to trade between various fiat-linked tokens has kept their liquidity thin, limiting adoption and utility, it explains, adding traders looking to hedge currency risk between USD-denominated DeFi investments and their local currencies have few options.
Vertex says it has developed the first facility for stablecoin perpetual swaps to trade on Terra. It will offer a range of leveraged FX products, based around Terra’s stablecoins, enabling crypto-natives to trade, pool, borrow and lend currencies via stablecoins in a similar fashion to their TradFi counterparts.
Vertex is built on the Terra blockchain, enabling, it says, seamless cross-border value exchange anywhere, making it an ideal ecosystem for an emerging multi-currency stablecoin protocol.
Vertex recently completed its Testnet phase, with participation from over 75,000 individual users. Capital from the fundraise will be used to scale the protocol’s technological and operational footprint ahead of its Mainnet launch.
“What Vertex is developing will be highly useful for DeFi participants, especially as global currency volatility persists,” says Michael Safai, managing partner at Dexterity Capital. “As one of the largest liquidity providers in crypto, we recognise the potential of this protocol to contribute towards a vibrant market for investors worldwide. We believe these products have a place in many DeFi portfolios, which is why we’re taking an approach to investment that will help ensure liquidity and growth for Vertex far beyond launch.”
Pack adds, “I’ve been fortunate to invest in many projects that have contributed to the maturation of crypto. Vertex’s innovative approach to a novel challenge has the potential to vastly improve how investors protect the value of their DeFi investments. It will be exciting to see how these products help our market continue to grow and take its place in the future of finance.”
Vertex claims to be the first trading protocol on Terra to couple an on-chain orderbook with the automated market maker (AMM) framework that operates as a decentralised venue. The orderbook technology enables users to place limit or market orders and find the best price across multiple pools of liquidity. This hybrid framework helps improve execution quality above and beyond the AMM model.
It can also combine a number of facilities in one venue, enabling traders to take positions and hedge in a more capital-efficient manner. The protocol will offer a broad range of capabilities to users via its perpetual swaps offering and a borrowing and lending facility that enables flexible collateral options as well as the ability to conveniently leverage spot.
The firm says perpetual swaps have become highly popular among crypto-native investors in recent years, with daily volumes regularly exceeding $100 billion. The aim of Vertex’s FX offering is to enable non-USD based traders to hedge the currency risk associated with staking yields and other DeFi-related investments.