Market Making on Polkadot Gets Prospective Boost With $22.3M Raised by dTrade

Which of the investors will be the primary market makers on the derivatives DEX is still to be finalized.

Sep 14, 2021 at 2:00 p.m. UTC
Updated Sep 14, 2021 at 2:07 p.m. UTC

Ian Allison is an award-winning senior reporter at CoinDesk. He holds ETH.

Towards the end of this year, the first application-hosting shards, known as parachains, are expected to launch on the much-vaunted Polkadot blockchain. (Parachains are already live on Polkadot’s “canary” network, Kusama.)

Gearing up for that occasion, decentralized derivatives exchange dTrade, which will reside on Polkadot’s Moonbeam parachain, has raised a $22.3 million market-making fund to ensure a sufficient depth of liquidity at launch.

The market-making fund has been amassed with investment from big names like Alameda, Polychain, DeFiance, CMS, Hypersphere, Divergence and Altonomy. Last month, dTrade also received backing from the likes of Cumberland DRW and the DeFi Alliance.

The decentralized exchange (DEX), which raised a $6.4 million seed round back in May of this year, created an on-chain program to collect pledges of capital, which go directly to market-maker accounts – firms that place both buy and sell orders for some tradable asset and pocket the spread to provide liquidity on the exchange’s books.

The investors earn interest in the form of a governance token, dTrade co-founder Rabeel Jawaid explained.

“We are still finalizing which of these investors will be the primary market makers on dTrade,” Jawaid said in an interview. “Initially, it’ll be two to three of them. But we can’t name them until legal agreements are signed.”

Solving the chicken-and-egg problem of attracting deep enough liquidity onto an exchange is a challenge, Jawaid said, adding that crypto pairs like BTC or DOT, the native asset on Polkadot, require around $600,000 to get trades flowing in a suitably efficient manner.

“You can see how each pair is expensive, and you need to have multiple pairs. So that becomes really expensive for exchanges,” he said.

The official launch of dTrade is expected soon after the Polkadot Parachain auction completes for Moonbeam, an on-ramp to build apps on Polkadot using Ethereum-compatible smart contracts.

“Our final audit is scheduled for the end of the second week of October and we’ll be ready to go,” Jawaid said. “I’m assuming it also aligns pretty closely with the Parachain auctions, although I’m not exactly sure.”


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Ian Allison is an award-winning senior reporter at CoinDesk. He holds ETH.

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Ian Allison is an award-winning senior reporter at CoinDesk. He holds ETH.

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