Venture capital coin is flowing into DeFi like never before as another trading platform hits its target for fundraising. The non-custodial Ethereum-based exchange dYdX has announced that it has raised a $10 million Series B round led by Three Arrows Capital and DeFiance Capital.
New investors include Wintermute, Hashed, GSR, SCP, Scalar Capital, Spartan Group, and RockTree Capital. The announcement added that it had continued support from a16z, Polychain Capital, and Kindred Ventures among others.
— dYdX (@dydxprotocol) January 26, 2021
Millions Pouring into DeFi
dYdX is geared towards more experienced derivatives traders rather than DeFi degens token swapping on Uniswap. Its infrastructure combines non-custodial, on-chain settlement with an off-chain low-latency matching engine with order books to deliver an institutional-grade, liquid, and low slippage trading experience.
Its user base and trade volumes have grown significantly in 2020 as bigger players tend to get more out of DeFi operations than the smaller traders getting stung on gas fees. It added that cumulative trade volume across perpetuals, margin, and spot trading increased 40 times, reaching $2.5 billion in 2020, up from $63 million in 2019.
In February 2021, dYdX will launch Layer 2 solution with StarkWare using zk-Rollups for perpetual contracts.
The announcement added that the funding will be used to decentralize more parts of the stack and hand over more control to users in addition to adding new assets and features to its perpetual contracts. dYdX will also be strategically investing in international growth markets such as Asia, with a focus on China.
The Decentralization Debate
There has also been much debate about whether projects can really call themselves ‘decentralized’ if they’re backed by venture capitalists that will be entitled to a share of any tokens or rewards. In reality, they’re just like corporations with shareholders and the whales will control governance votes and the future direction of the protocol.
Last week, Uniswap founder Hayden Adams responded to a thread started by Synthetix founder Kain Warwick on exactly this subject;
DeFi analyst Chris Blec, who has been highly critical of any form of crypto centralization, aptly commented that VC involvement inevitably leads to decisions that are good for founders and strategic investors, but bad for users.