In this regard, Liam Kovatch, CEO and co-founder of Paradigm explained that the decision to shut down was mainly due to the firm’s “failure to carve a viable niche in the DEX [decentralized exchange] marketplace” and also because of grounds “within and outside” of the team’s authority.
Following the establishment in 2018, Paradigm Labs was funded for the creation of a product christened Kosu, a liquidity compilation covenant for DEXs.
Over the past two years, Kovatch explained, the DEX domain has “evolved considerably,” with the outcome that several of Paradigm’s initial initiatives and investment in Kosu has turned outdated by overhauls in DEX market design:
“We’ve been able to observe significant developments such as the launch of Uniswap, the establishment of the decentralized finance (DeFi) movement and more. While exciting and positive for the community at large, these developments have made the DEX space incredibly fluid, and challenging for an organization like ours to navigate.”
Kovatch disclosed that Paradigm Labs started to have second thoughts about Kosu’s feasibility in the fast evolving DEX ecosystem in the beginning to mid-2019, partially due to popularity of Uniswap and initial advancements on the DEX covenant 0x (ZRX).
Amidst a growing “crowded liquidity protocol/networking ecosystem,” Kovatch pointed out, the team structured a new solution, a non-custodial appeal for quotation mechanism named Zaidan, developed on 0x.
This plan, nevertheless:
“Came to us late in the company’s life cycle at which point we were under-resourced to fully develop Zaidan […] were quite hesitant to pivot completely away from Kosu due to the investment we had made in the project. In retrospect, this hesitation was a mistake. ”
As a whole, Kovatch ascribes entering DeFi domain prematurely as the reason for failure of Paradigm Labs, and the venture’s inability to raise requisite financing to build Zaidan into an effective real-world trading product.
DEXs, also referred to as non-custodial, decentralized crypto exchanges, facilitate users to transact on a p2p basis.
They utilize smart contracts to mechanize trade matching and asset dilution with a purpose of permitting customers funds to stay under their supervision.
Their phlegmatic adoption has thus far widely been ascribed to their below par liquidity compared with popular centralized exchanges.
In the meantime, DeFi is utilized to assign the decentralized funding market, or the utilization of blockchain, virtual assets and smart contracts for financial facilities such as credit and lending.
Early last month, frozen assets in the DeFi market i.e. throughout its gamut of smart contracts, covenants and decentralized apps, recorded a landmark $1 billion in value. This mirrored a 4x growth on y-o-y basis.
Later in February, nevertheless, the industry faced a reversal, with market eroding by $140 million from its high of $1.20 billion. This was a result of a chain of back-to-back “flash loan” onslaughts on the decentralized lending covenant bZx.