Polychain Leads Paradigm Seed Round
Blockchain at Columbia’s VP speaks on Paradigm and its future
Liam Kovatch has been an enormous talent and influence at Blockchain at Columbia. As Vice President, he helped build the organization into a powerhouse in the New York City community and on Columbia University’s campus. After raising a seed round led by Polychain Capital, Liam has taken a leave of absence from school and B@C to build Paradigm, a relay protocol for hybrid decentralized settlement logic, moving to San Francisco with his talented team. I sat with Liam to get his perspective on Paradigm’s technology, founding a blockchain startup, the state of crypto, and Blockchain at Columbia’s role in the DLT ecosystem.
Liam, tell us a little about yourself and how you entered the world of distributed ledger technology?
Hi! I’m Liam Kovatch, the founder and CEO of Paradigm. I was first introduced to DLT as a sophomore in high school through my interest in mining Bitcoin as a way to make some quick money. This was early 2014, pre-Ethereum and when DLT was almost exclusively focused on digital currency. After my parents forced me to shutter my mining operation (the electricity bill became outrageous), I largely forgot about blockchain until a friend of mine, Alex, introduced me to Ethereum in early 2015. The idea of a decentralized world computer fascinated me and I started down the rabbit hole.
In high school, I was lucky enough to attend Arizona State University for some upper division math classes where I became interested in number theory and cryptography. As a result, I became fascinated with emerging blockchain technology, as it is essentially applied cryptography. In many cases, I found the low-level theory that underpins DLT to be more fascinating than use cases. As I became more and more interested in blockchain technology, my main interest became research. Naturally, at Paradigm, one of my primary roles is leading our research efforts.
What’s the story behind Paradigm’s creation and what was your inspiration for founding it?
While making my college decision, I really believed I wanted to become a quant. The intersection of my passions for pure mathematics, economics and computer science, seemed to motivate a quantitative finance track. During my first week at Columbia, I attended a recruiting event for Citi Bank and decided two things: one, that the life of corporate finance was not for me and, two, I never wanted to work for anyone in my life. After this epiphany, I reevaluated and decided blockchain was the route for me.
While attending an informational event for the Columbia entrepreneurship student group (CORE), I met some crypto-focused students and was interested in his perspective on blockchain. I became involved with those efforts and met some very smart peers that were also extremely interested and knowledgeable in the space. This gave me the confidence to pursue something I had been considering for a while, decentralized derivatives.
I had been an active trader in the blockchain space for a while and spent a lot of time on the website Quantopian in high school. The inability to hedge positions and take more complex positions within the crypto market felt extremely restricting to me; thus Paradigm was born. Paradigm was originally positioned similarly to the dydx project, as a decentralized derivatives protocol, but as I began working out the specifics with a small team, we quickly decided to pivot to focus on decentralized relay technology, which we believed, if developed successfully, could serve as the foundation for more complex and mature markets. The 0x project was just beginning at this point, but was extremely compelling to me. They were the first decentralized exchange project that, in my opinion, had a truly competitive price discovery mechanism, so it made sense to position Paradigm in the hybrid-decentralized exchange stack.
What are the biggest problems that decentralized exchanges currently face? How does Paradigm remedy these?
Decentralized exchanges are just beginning to become legitimate contenders to traditional centralized exchanges and still face many challenges. The biggest problem that Paradigm helps solve is the lack of liquidity for DEXs. Paradigm does this by abstracting liquidity from exchange systems to a decentralized network.
In Paradigm’s model, order broadcast, order discovery and order settlement happens in a completely decentralized manner. Centralized exchange parties are only involved in the process of trade execution. This model creates truly global liquidity.
Beyond liquidity, decentralized exchanges face many challenges. These include complicated user experiences, high latency, trade collisions, front-running, etc. Luckily, there are some very smart people working on these challenges and the incentive to solve these issues is strong. Like with any new technology, with time will come progress, and for DEXs that means solutions to these challenges that will allow for truly mainstream adoption.
How was fundraising? How will Paradigm’s new strategic investors help in its growth?
Fundraising was definitely a long and intensive process; I think it is for any first-time founder. Henry [Harder] and I were taking 10–15 meetings a week for two months, but we couldn’t be more excited about our syndicate. Polychain has a breadth of experience with protocols and offers amazing insight into many technical pieces of our system. Dragonfly has an uncanny understanding of exchange systems and infrastructure and they’re specifically structured to support financial technology projects. Chapter One and Jeff Morris offer product support that is truly elite and complements the technical expertise of the other firms. We think our syndicate is tremendously well positioned to help us hit specific KPIs over the next few years.
Tell us a little bit about Paradigm’s relationship with 0x from a software perspective.
Paradigm has positioned a layer above settlement systems within the hybrid decentralized exchange stack. Our OrderStream network does not enforce data object types, therefore many settlement platforms and order types can be implemented and relayed via our network. This means that any type of exchange logic that uses an off-chain relay and on-chain settlement (hybrid decentralized) can be traded on Paradigm. With that said, 0x was the pioneer of this architecture and their focus on spot exchange remains the most popular settlement pipeline implemented on Paradigm. The 0x team is, in my opinion, the premier decentralized application project. Their leadership and engineering talent is bar none, thus it made sense to make their project our first integration, and to focus our project within their ecosystem.
What’s next for Paradigm? What are your plans for this Fall?
Paradigm is moving! We have been distributed for a while now, but we are in the process of moving the core team out to the SF area. We are setting up an office, which will allow us to expand our team. We are currently hiring two positions, a distributed systems engineer and a full-stack web3 engineer, if you are interested please reach out. In regards to more specific milestones we are hoping to accomplish over the next few months, we are hoping to push a public beta of our core protocol. We are working hard to get the core pieces of this system developed and hope to have them ready fairly soon. Most of our code is open source and we encourage contributions and review on our GitHub.
You’re a young founder with some school experience at Columbia. What was it like trying to build a company while attending university? Any advice for student founders?
It’s undoubtedly busy to balance starting a company and school, but if you are passionate you can find the time. I compare it to doing sports in high school, it’s all about prioritization, discipline and time management. My advice for student founders would be to pursue your project relentlessly. The world doesn’t wait for you, so you have to be extremely competitive in evolving an idea and executing precisely and quickly. It’s also ok to skip class, as long as you pass.
How has your work as Vice President of Blockchain at Columbia helped your project and your career?
Blockchain at Columbia opened countless doors for me. It gave me the platform to explore my passion for DLT at a high level and also surrounded me with incredibly bright individuals. I believe competition is fundamental to success, and when you are surrounded by smart people, it pushes you to be your best. Blockchain at Columbia was the highlight of my Columbia experience and will be instrumental to many of Paradigm’s future efforts.
What’s your take on the current state of the DLT ecosystem? What are you most hopeful about? Concerned about?
It’s an exciting time for the blockchain technology and one of the first times in recent memory that the focus is on development, not speculative investing. Within the space, I think a few battles have already been won (currency projects, platform projects). I’m extremely long on BTC as a store-of-value and believe Ethereum will be the platform of choice assuming they can execute. Dfinity is the only other project of interest in this space for me. My somewhat optimistic and biased opinion is that Ethereum will become the settlement layer of the world economy. I have a hard time believing in the efficacy of blockchain projects beyond finance and digital markets, at least for now. I do believe we are still in a bubble, but the speculative interest in long-term DLT tech will never go away. I’m also long on tokenized securities and believe they could be Ethereum’s ‘killer app’. There’s not too much in the space that I am particularly concerned with. I think most problems will resolve with time and development, including scaling and regulation. Developer interest in the space is at an all-time high which, to me, signals a bright future for DLT.
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