Polychain Leads $23M Bet on Startup Streamlining DeFi Portfolio Management

Sommelier uses a cross-chain network of validators to manage Uniswap v3 positions.

Oct 20, 2021 at 1:01 p.m. UTC
Updated Oct 21, 2021 at 1:52 p.m. UTC

Portfolio management in decentralized finance (DeFi) remains a highly manual and, at times, costly process, especially on platforms like Uniswap v3 where “concentrated liquidity” means that a user might have their position liquidated entirely to one side of a pair being traded.

However, Sommelier is working to change that. The Ethereum-based and soon-to-be Cosmos-managed co-processor for DeFi traders and liquidity providers (LPs), has raised $23 million in a round led by Polychain Capital, the team announced on Wednesday.

The round included participation from Byzantine Ventures, Tendermint Ventures, Secureware Capital, D1 Ventures, Ferngrove Ventures, Zola Ventures and Alameda Research.

Sommelier might roughly be thought of as a yield vault similar to Yearn.Finance: users deposit liquidity, and the platform uses the funds for automatically rebalancing Uniswap v3 positions, routing Uniswap trading fees to the depositor.

According to the press release, in the first six months since the launch of its “Pairings” product, “Sommelier has helped LPs place over $10 million in liquidity on Uniswap V3, which successfully generated over $2 million in fees for portfolio owners.”

Sommelier co-founder Zaki Manian, who refers to the platform as “Somm,” says the funds from the round will be used to continue development of the “Cellars” product, which is currently in prototyping. These upgradable contracts use a network of Cosmos-based validators to manage positions.

“Cellars gather data from people analyzing the Uniswap v3 pool to determine which strategies will be optimal,” Manian said. “The decision-making is diffused across a number of validators.”

The team expects validators will provide superior analysis and data feeds for positions via an incentivized network, and users can choose which validators get to manage the portfolio via a forthcoming governance token. Cellars will eventually expand to other DeFi platforms for strategies as well.

The multi-chain architecture is somewhat unusual, but Manian says it’s a natural development given the work that’s been done in the Cosmos ecosystem over the years.

“I’ve been working for the past five years in multi-chain system. Most people in Cosmos, they were working on token bridging in 2016. That’s done, that’s not exciting anymore – what we’re working on now is composability. ‘How do you take the strengths of different chains?’” he said.

Sommelier is currently internally discussing its token launch, Manian said, noting that a liquidity mining program could be in the works shortly after.

“30% of the token is in the community treasury. Expect to see governance proposals on which Cellars launch first, and a likely liquidity mining program,” he said.

DISCLOSURE

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Andrew Thurman is a tech reporter at CoinDesk with a focus on DeFi.