Decentralized crypto derivatives exchange dTrade announced a $6.4 million seed round Thursday as it prepares to go live on Polkadot later this year.
Project leads say dTrade will be the first derivatives DEX on Polkadot’s multi-chain network. At a $50 million valuation, according to co-founder Nikodem Grzesiak, dTrade secured lead backing from Three Arrows and DeFiance with investments from Polychain, ParaFi and other crypto venture capital regulars.
Run by a decentralized autonomous organization (DAO), dTrade will aim to capture a slice of the heavily centralized, multibillion-dollar market for crypto derivatives. Brand names like FTX and BINANCE see tens of billions of dollars in derivatives volume daily while decentralized alternatives, none of them smash-hits, capture orders of magnitude less.
Grzesiak estimated that less than 1,000th of the crypto derivatives market’s perpetual swap volumes flows through decentralized exchanges. He’s “optimistic” dTrade’s perpetual swaps and options support can diminish that gap.
“Ultimately the thesis is that decentralized platforms are better at distributing value to the end users, so there is simply a better value proposition for traders,” Grzesiak said. He also said holders of the protocol’s DET governance token will receive their share of the revenue, instead of it flowing to “the management, or the holding company behind the exchange.”
But DEXs face additional challenges in the derivatives space. They don’t go after traders who close their trades below the bankruptcy threshold, according to Grzesiak. This would create an untenable negative balance, he said.
To cover the gap dTrade is prepping an “insurance mining program” that rewards users who stake their USDC asbackstop with a share of the exchange’s native governance token, Grzesiak said. The DAO has set aside 5% of the DET token supply for incentivization.
Other investors in the round included Huobi, Mechanism Capital, Magic Ventures, Bixin Ventures, IOSG Ventures, Hypersphere Ventures and Fenbushi Capital. Alameda Research, CMS Holdings, Wintermute, MGNR, PNYX, Kronos, Altonomy and LedgerPrime will support liquidity on dTrade, said Grzesiak.
