With the addition of Paradex, a decentralised perpetuals platform, Paradigm, a provider of liquidity to institutional crypto derivatives traders, is expanding into decentralised finance (DeFi).
Paradex is a hybrid derivatives exchange that combines the liquidity and performance of centralised finance (CeFi) with the transparency, trustlessness, and self-custody of DeFi, according to Paradigm, a different entity from the venture capital firm of the same name. According to a recent statement at the StarknetCC event in Paris, the platform would employ the recently released appchains from scaling-technology company StarkWare.
The system was created in part to address the lack of trust in centralised finance following the multibillion-dollar collapse of FTX due to a management-driven liquidity crisis. The exchange also attempts to address fragmentation across legacy CeFi risk engines (software that analyses market risks), which reduces capital efficiency and leads to lower liquidity.
StarkWare, the $8 billion firm behind the Ethereum layer 2 network Starknet, announced earlier this week that it was working on “Starknet Stacks,” software tools to help developers create unique layer 2 blockchains. Custom chains can generate “appchains,” which are blockchains optimised for a specific use. For six months, StarkWare and Paradigm worked together on Paradex to make it viable to introduce the system as a layer 2 appchain. They intend to collaborate to make Paradex a layer 3, which will provide better scalability and control over the technology stack.
“As we began evaluating blockchain scaling technologies that would enable Paradex’s ambitious vision, it became clear that we needed a solution that would not only delivers scalability, but also control and customization. A private instance of Starknet, or Appchain, provides this in abundance,” Nafaa Hendaoui, head of product at Paradex, said in a press release
Singapore-based Anand Gomes and Michal Koonin, both traditional finance professionals who spent years on trading floors at firms such as KeyBanc Capital Markets and Wolverine Trading, created Paradigm in 2016. GCP Capital, GSR, and CMT Digital, among others, have invested in Paradigm.