Big Guns Back $10M Investment in DeFi's dYdX

Trading venue dYdX has raised $10 million in a Series B funding round led by Three Arrows Capital and DeFiance Capital.

The platform, launched in 2017, offers a spread of decentralized trading products including both bitcoin and ether derivatives. The San Francisco-based startup plans to use the funds to increase its product offering, further decentralize its platform and increase its presence in China, according to a blog post shared in advance with CoinDesk.

"dYdX was the first [decentralized finance] app I ever used and I am elated to have the chance to invest in [it] today,” Three Arrows Capital co-founder Su Zhu said in a statement.

Three Arrows was joined by a lengthy roster of crypto investors in the Series B, including Wintermute, Hashed, GSR, SCP, Scalar Capital, Spartan Group and RockTree Capital. The round was also joined by previous Series A investors Andreessen Horowitz and Polychain Capital.

The trading platform has had a gangbusters year with trading volumes across spot, margin and perpetual contracts jumping fortyfold – from $63 million in 2019 to $2.5 billion in 2020, the firm said.

Margin and spot trading made up the lion’s share of that activity clocking in at $1.9 billion for the year. The startup released its BTC and ETH perpetual products – which operate similarly to a futures contract but without a set expiry date – in May and August 2020, respectively.

Gunning for growth

To date, dYdX’s impressive growth has been overshadowed by other DeFi products such as Compound Finance and Uniswap.

Indeed, DeFi Pulse ranks dYdX as the 18th-largest DeFi market by total volume locked (TVL) at $150 million.

In a bid to climb the DeFi rankings, dYdX is introducing rollups, a technology designed to increase throughput and reduce gas fees. High gas fees on Ethereum have hamstrung young DeFi markets in recent months.

The dYdX solution involves a product based on StarkWare’s Cairo software and is expected to be rolled out in February.

"Our goal is to become one of the largest crypto exchanges – period. To accomplish this we’re building a Layer 2 system with StarkWare enabling cross-margined perpetuals, allowing for significant improvements to trading at scale,” dYdX founder Antonio Juliano told CoinDesk in a Telegram message.

Correction (Jan. 26, 15:44 UTC): Coinbase co-founder Fred Ehrsam participated in the prior series, not the Series B.