Decentralized exchange Vertex launches on Arbitrum

Vertex launches on Arbitrum, a “layer 2” built on Ethereum Art by Fortune

After November’s collapse of FTX, decentralized exchanges have grown in popularity as users clamor for a model where companies control their assets. Even as Crypto Winter deters trading, data from The Block shows that the market share of platforms such as Curve and Uniswap has grown compared to centralized competitors.

On Wednesday, Vertex Protocol – a DEX built on Ethereum layer-2 Arbitrum – is launched to offer high-speed spot and derivatives trading. Initially, the exchange will offer trading only for Bitcoin and Ether, but Vertex Protocol co-founder Darius Tabatabai told Fortune in an exclusive interview that the platform plans to expand to 14 markets in perpetuals, a type of derivative futures contract, in the next three to six months. Vertex raised an $8.5 million seed round in April at a $100 million valuation.

While the exchange will be equally focused on retail and institutional traders, Vertex is launching with a number of prominent backers in the market-making and proprietary trading spaces, including Jane Street, Dexterity Capital, Hudson River Trading and GSR.

“Five good market-making firms can provide great liquidity to thousands of retail traders,” Tabatabai said. “It’s well worth the time to ensure these firms have a low-friction experience and can provide value to the masses.”

Tabatabai has a background in traditional finance, works as an options trader and runs metal trading desks at Credit Suisse and Bank of America before working in a hedge fund. He became interested in crypto in 2017, trading on the side before running crypto-focused proprietary trading at various firms.

He originally had the idea to build a decentralized exchange on Terra, the infamous blockchain that hosted the algorithmic stablecoin TerraUSD, but decided to switch to Arbitrum after the project’s spectacular collapse last year.

The goal for Vertex was to build a multi-currency trading platform with an efficient market trading structure. As Tabatabai explained, users can deposit whatever tokens they have that Vertex accepts as collateral and then trade them, as well as use them as collateral to trade perpetual, a popular derivative contract in the crypto ecosystem that allows users to speculate on the future. price movements of tokens.

Vertex uses a combination of an off-chain order book with an on-chain automated market maker, which Tabatabai says allows the platform to combine the best features of decentralized and centralized exchanges, with trading speeds that surpass other decentralized platforms and rival centralized ones.

“If you are a market maker, you can come and provide liquidity as if we were a centralized exchange,” he said Fortune. “But then also in the background, we can open up the possibility of retail trade [traders] the ability to do AMM [automated market makers] to find liquidity that way.”

The prevalence of retail traders embracing complex derivatives is a unique feature of crypto, and inexperienced users have been exposed to increased risk, especially in the prolonged bear market. This also creates specific dynamics that can drive exchanges like Vertex, which seek parity when it comes to the distribution between retail and institutional traders.

“It tends to be a more momentum-driven market because it’s driven by a kind of FOMO, fear of crowds — people flocking to trades,” Tabatabai said. “It’s part of the behavior of the market.”

With Vertex launching today from private beta, it will begin offering users an incentive program where they will receive a native token called VRTX for trading that will drop in October.