Quick take:
- Ellipsis Labs’ main product is a decentralised exchange platform built on top of Solana.
- The decision to choose Solana as the host network was made based on the requirements of active liquidity.
- Ellipsis previously raised $3.3 million in a seed round led by Electric Capital.
Ellipsis Labs, a decentralised finance company building on Solana has completed a $20 million Series A round led by Paradigm and with participation from Electric Capital. Electric led Ellipsis Labs’ $3.3 million seed round announced in August 2023.
Ellipsis said it will use the fresh capital to expand its engineering team as it looks to accelerate efforts in creating “a new financial ecosystem that offers competitive financial products on top of high-throughput blockchains.”
Phoenix launched in February last year, with its public release following later in August. Ellipsis describes its platform as “the fastest on-chain Orderbook in DeFi,” characterised by low protocol and network fees.
Decentralised exchange platforms allow traders to trade directly with each other without using a centralised custodian. However, liquidity is often a problem, but Phoenix addresses this challenge by allowing market makers to compete on quality of liquidity, the company said in a statement.
“We think there’s a path to building DeFi products that are comparable— then significantly better—than what exists on centralized venues,” co-founder Eugene Chen said.
According to the announcement, Phoenix has chosen not to incentivise market makers by offering them extra tokens, choosing to offer opportunities on the exchange platform.
“Most of the time, if you deposit money into an automated market maker (AMM), you’re going to end up losing money. And so the way these AMMs are able to attract liquidity, oftentimes, it’s through incentives to make it profitable,” Chen told Fortune.
According to Chen, offering profit incentives to automated market makers (AMMs) is not sustainable because of the requirement for a constant inflow of capital.
Chen and his team believe proving the system exchange is self-sufficient is “the most important thing”, he said.
Chen added that the decision to choose Solana was based on the requirements of active liquidity. “The blockchain needs to run really, really fast, so it needs to have very high throughput, and the fees need to be very low.”
Commenting on his company’s leading role in the fundraising, Matt Huang, co-founder and managing partner of Paradigm said: “We’ve known and respected Eugene and Jarry for several years, and we’re excited to formally partner with some of the most ambitious and principled builders in DeFi.”
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