Crypto Liquidity Network Paradigm Leans Into DeFi With StarkWare

Paradigm, which provides liquidity to institutional crypto derivatives traders, is branching into decentralized finance (DeFi) with the addition of Paradex, a decentralized perpetuals platform.

Paradigm, a separate entity from the venture capital firm of the same name, said Paradex is a hybrid derivatives exchange that combines the liquidity and performance of centralized finance (CeFi) with DeFi’s transparency, trustlessness and self-custody. The platform uses the newly announced appchains from scaling-technology giant StarkWare, according to a Friday announcement at the StarknetCC event in Paris.

The system was built partly to address the lack of trust in centralized finance following the multibillion-dollar collapse of FTX due to a management-driven liquidity crisis. The exchange also aims to take on the fragmentation across legacy CeFi risk engines (software that analyzes market risks), which impacts capital efficiency and leads to lower liquidity.

StarkWare, the $8 billion-valued company behind the Ethereum layer 2 network Starknet, said earlier this week that it was working on ”Starknet Stacks,” software tools to make it easier for developers to create custom layer 2 blockchains. The custom chains can create “appchains:” blockchains that are optimized for a specific application. StarkWare and Paradigm collaborated on Paradex for six months to make it possible to introduce the system as a layer 2 appchain. They plan to work together to develop Paradex into a layer 3, which offers greater scalability and more control over the technology stack.

“As we began evaluating blockchain scaling technologies that would enable Paradex’s ambitious vision, it became clear that we needed a solution that would not only delivers scalability, but also control and customization. A private instance of Starknet, or Appchain, provides this in abundance,” Nafaa Hendaoui, head of product at Paradex, said in a press release.

Singapore-based Paradigm was founded in 2016 by traditional finance veterans Anand Gomes and Michal Koonin, who both spent years on trading floors at the likes of KeyBanc Capital Markets and Wolverine Trading. Paradigm has received backing from asset manager GCP Capital, liquidity provider GSR and investment firm CMT Digital, among others.

UPDATE (July 21, 15: 35 UTC): Adds appchain explanation in fourth paragraph, quote in fifth.

Edited by Sheldon Reback.

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