Mangrove, a decentralized exchange (DEX), went live on Polygon's testnet with a programmable order book, the firm said on Monday.

Paris-based Mangrove has raised about $10 million so far, and is backed by trading and market making powerhouses like Wintermute and Cumberland. A mainnet launch will follow around the start of next month, the company said.

2020’s so-called “summer of DeFi” delivered the realization that anyone could be included in providing liquidity to financial markets, not just big named firms and institutions. However, these original DeFi tools were rather blunt and developers have since been sharpening the infrastructure needed to evolve the space.

Mangrove’s “advanced limit order” innovation means an intention to trade can take the form of a piece of code and function like an IOU, so an offer to sell some ETH at a certain price, for example, can exist on-chain without the need to lock up funds. That allows traders to use those assets elsewhere without canceling the offer and recovering the funds, explained Mangrove co-founder Vincent Danos in an interview with CoinDesk.

“If you declare your trading intention on Mangrove, a market engine will call that piece of code and ascertain whether the liquidity as promised is actually available and deliver it,” Danos said. “If it’s not, then you have to pay a little compensation or penalty, related to the amount of gas the taker incurred triggering a promised trade that you’re not going to fulfill.”

This more flexible version of a limit order allows traders on Mangrove to propose selling some digital assets at a given price, while also depositing those assets as collateral on a lending platform and generating passive yield, for example. “So at the same time, you have a savings account, and can sell at a certain exit price,” Danos said.