Crypto Startup dYdX leaves you & # 39; Short & # 39; Ethereum, raises $ 10 million


A startup called dYdX has raised $ 10 million in funding from investors to develop financial software that allows people to borrow money from one another without using a broker.

The five-person company has developed a margin negotiation protocol based on the Ethereum computer network. It aims to enable people to create new financial products related to cryptocurrency, such as interest-generating loans, short selling or long positions with leverage. Unlike the world of traditional finance, technology does not require that any intermediary act as a trusted intermediary.

"Decentralized finance will be the first real application of blockchain technology," said Antonio Juliano, founder of dYdX, in a call with Fortuna. He described the evolution of technology in this way: Blockchain started with Bitcoin, or decentralized money. So they allowed the creation of decentralized exchanges, such as the 0x and Kyber projects, which allow users to exchange virtual tokens without the need for a centralized exchange, like Coinbase, in between.

Now Juliano sees an opening for the instruments built on these bases. "The next logical thing is derivatives," said Juliano, who previously worked as an engineer at Coinbase and Uber. These types of financial contracts will improve on the "primitive" way of trading cryptocurrency today, he said, and will lead to "lower volatility in the underlying market".

Juliano's dYdX project combines the so-called smart contracts of Ethereum, which help automate financial agreements, with the characteristics of commercial transaction offered by decentralized exchanges, in this case 0x, to create derivatives. These derivatives can help traders escape risk, speculate in new ways and ultimately smooth the sawdust markets, he said.

Betting against Ethereum

Anyone can build a product on top of dYdX software, including dYdX.

At the beginning of this month, the company presented its first product, Expo, an application that allows investors to "short" Ethereum, or bet that the price of cryptocurrency will decrease, simply by purchasing a virtual token called, appropriately, the "short token Ethereum". Prior to this, the easiest way to get an Ethereum short film was to take positions in a centralized exchange, such as Bitmex or Circle & # 39; s Poloniex.

"Fundamentally, Expo abstracts many complications from margin trading away from the user," said Juliano. "People do not have to worry about getting a loan".

In theory, when the price of Ethereum's native currency, Ether, falls by some amount, the price of the short Ethereum token should rise by an equivalent amount in dollars. In cases where the price of Ether increases, the opposite is true: the short Ethereum falls.

Juliano's team is planning to launch more assets, including a long-levered Ethereum token, which is designed to amplify the gains or losses of investors trading on the sidelines. In the next two or three months, Juliano said his team would try to add more resources, depending on their liquidity, like the ZRX token, the native currency of 0x.

Expo is currently a free service, but Juliano says that dYdX may charge transaction fees in the future. Alternatively, the company could issue a token that allows it to collect costs at the level of the basic protocol later.

For now, making money is not the priority of the team. "Our goal is to make people use the protocol," Juliano said, noting that the function that has attracted the greatest interest so far is that which allows lenders to accrue interest to provide loans to other investors.

Bets on financial derivatives

The last round of financing for dYdX, valued at $ 10 million, sees a pair of investors double the departure.

The main investors are a16z crypto, an investment fund focused on cryptography created this year by Andreessen Horowitz, the Silicon Valley venture capital firm, as well as by Polychain Capital, a hedge fund specializing in investments related to cryptocurrency. Both investors led the former $ 2 million seed funding of dYdX in November 2017.

Olaf Carlson-Wee, CEO and founder of Polychain Capital, said he was impressed with Juliano's engineering skills and "strong growth mindset" when they worked together with Coinbase. He described dYdX's "short Ethereum" token as "an anti-ether or an obscure ether" and said it is only the first example of a peer-to-peer financial product that the company intends to develop.

Chris Dixon, co-star of Andreessen Horowitz's encrypted fund, also praised the engineering skills of the dYdX team. he said their products would be useful for cryptocurrency investors interested in loan and hedging risk.

The last round of financing also includes the participation of a number of other venture capital companies. These include Craft Ventures, Bain Capital Ventures, Dragonfly Capital, VY Capital, Abstract Ventures, Kindred Ventures and 1confirmation.

Several angelic investors also participated. Among these was Naval Ravikant, founder of the startup website of the AngelList startups; Elad Gil, a technology expert and startup consultant; Kevin Hartz, co-founder of the Eventbrite ticketing site; and Fred Ehrsam, co-founder of cryptocurrency, exchanges Coinbase.

With the new secured financing, dYdX is looking to expand. "The biggest priority is to make the team grow," said Juliano. "We are looking for engineering, planning and operations in San Francisco".

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