Welcoming IDEX to the Collider Ventures family
We’re thrilled to finally announce publicly that Collider Ventures had invested strategically in IDEX! We believe in the team and see IDEX 2.0 as a unique hybrid between centralized and decentralized exchange platform. IDEX joins Collider’s strong venture portfolio and we’re excited to start seeing synergy between the companies we partner with.
Background and History of IDEX
IDEX was established in 2017 by brothers Alex Wearn (CEO) & Philip Wearn (COO). After launching in the fall of that year and with Jason Ahmad (CTO) joining shortly after, IDEX quickly became the #1 DEX and DApp on the Ethereum network. With over $2 billion worth of trades spread across 300k users, IDEX holds the notorious achievement of having the largest state on Ethereum, consuming 1% of the network capacity.
IDEX came in at the perfect timing with its launch, they had innovated on bringing the security and openness of a decentralized exchange, without compromising on the speed and user experience (UX) of a centralised exchange.
IDEX 1.0
The first version — IDEX 1.0 had solved these issues by centralizing trade execution, allowing the user to see their balance update in real-time, while maintaining auditability with on-chain trade settlement.
The offering IDEX 1.0 brought to the market was unique and appealing and evidently led to monumental growth and adoption. The cost of this success were the accumulated costs and limitations in scalability. Each trade was individually settled on the network, each with an associated gas fee. With an average cost of $0.10-$10, depending on network conditions, IDEX users alone paid a whopping $4.3 million in gas fees in 2018. Limitations in scalability also arose with only five IDEX 1.0 trades occurring each second. The team was well aware of these inherent challenges and started innovating on a solution which would reduce the frequency of these transactions by bundling the settlement of trades.
Enter IDEX 2.0
The IDEX 1.0 experience was sufficient for the early days where demand was still limited and users were willing to compromise on user experience for a non-custodial solution. However, this position was increasingly harder to justify with increasing demand for the product and leading to slower performance.
The solution: IDEX 2.0, a layer-2 network which allowed for the settlement of an infinite number of trades in one transaction thereby allowing for indefinite scaling.
Decentralization
When people say “decentralization”, a few aspects usually come to mind; for IDEX the important ones are self-custody, or enough flexibility in custodianship and the detection of unfair trading.
Custody
In terms of custody flexibility, when using IDEX, people will be locking their funds on a layer-1 smart contract, starting with Ethereum, but adding more layer-1 chains over time. This will allow traders to use a custodian of their choice or choose to go with a full self-custody option.
Once locked in the smart contract, IDEX layer-2 records the amounts of funds, to whom they belong and the trades they’ve entered. The matching engine and order book are run in a centralized fashion, but they are recorded on layer-2 and settled on layer-1 every constant amount of minutes (layer-1 settlement time frame proposed to be between 10–30 minutes and can be adjusted according to user needs and changing market fees or other conditions).
Fair Play
IDEX’s layer-2 is a slightly delayed view of the IDEX 2.0’s centralized database, allowing users to log the API data and compare that to what’s written on layer-2. This is what makes it possible to have a proof of execution and proof of funds.
Token Mechanics
The IDEX token is used as a collateral for staking and verifying, with a mechanism in place to enter disputes.
The IDEX token consists of a supply of 1 billion token of which 50% will be used to accelerate the adoption of the network, with 40% allocated to programs such as market maker rewards to subsidize the growth of the network and 10% will be for IDEX memberships. The remaining 50% of IDEX is allocated as such: 25% for the founding team, 10% for the future employee token pool, 10% for future use and 5% for the expenses IDEX, a business, has.
IDEX tokens are critical in the aligning of the incentive structure of the exchange and the IDEX token stakers. In remuneration for providing the IDEX network with security and operational resources, stakers are awarded 50% of trade fees. Stakers can be of two types of nodes. Tier 1 nodes are responsible for holding a real-time copy of the system ledger and for auditing the layer-2 network for fraudulent activity. They are further aligned by being awarded more tokens for correctly activating fraud proofs. Tier 2 provides API service allowing cold storage staking with no slashing risk. More on that here
User Experience
Sometimes “decentralization” resembles privacy in terms of UX: people generally understand the importance, but when it comes to convenience, users often opt to centralized social networks that know everything about us. IDEX has traded some of the decentralization in favor of consumer application grade.
In IDEX 2.0 the order book and matching engine are centralized. This gives professional players such as trading firms low latency, high throughput, hundreds of thousands transactions per second, any and all types of orders and institutional grade API standards.
IDEX believes in decentralization and is committed to maximizing it. IDEX 2.0 is where the sweet spot of UX, efficiency and decentralization is with current technology considering the scalability of layer-1s, and their interoperability, leaving a partially centralized core is set to strike a balance between consumer application UX and the decentralization ideals. We’re looking forward for IDEX 3.0 to bring even higher degrees of decentralization while maintaining institutional grade UX.
Why We Invested
Thesis-Driven
Exchanges are probably the most validated and battle-tested business model in the crypto space, yet our fund was officially launched mid-2019, a time in which hundreds of exchanges were already in existence and the majority of them struggling. To invest in an exchange we had to find a team that brings something new to this crowded market segment.
The DEX Space
Decentralized exchanges are a great opportunity, but we felt that with the current tech it’s not feasible to build an exchange with the specs and experience pro-traders are used to, while still being fully decentralized and supporting multiple assets. A UniSwap-type experience better suits the DEX space, where users don’t expect to have HFT and special order types.
Pragmatism
In that sense, IDEX 2.0 was a great fit for Collider’s thesis. IDEX team understands the compromises between decentralization and user experience. Collider and IDEX both want to advance this Blockchain and crypto space, while being pragmatic and catering for a broad user base; this balance and understanding presented to Collider the differentiating approach we were looking for.
We also see IDEX bringing forward and integrating many DeFi products in the future, and being used by those products either directly, or in-directly through market makers.
IDEX is a great fit in terms of Collider’s portfolio composition, and we are already seeing a few ways in which Collider adds value to IDEX through our assets, portfolio companies, and ventures network.
We are excited to join forces with IDEX’s existing community and great investors such as G1, Borderless Capital, and Gnosis, and back Alex Wearn, Philip Wearn, Jason, and the rest of the team in their journey building important utilities for the future of finance.
Learn More about Collider Ventures
- Website: www.collider.vc
- Twitter: https://twitter.com/collidervc
- LinkedIn: https://www.linkedin.com/company/colliderventures/
- Facebook: https://www.facebook.com/colliderventures/
Learn More about IDEX
- Website: https://idex.io/
- Exchange: https://idex.market/eth/idex
- Twitter: https://twitter.com/idexio
- Facebook: https://www.facebook.com/IDEX.io/
- LinkedIn: https://www.linkedin.com/company/decentralized-capital/
- Medium: https://medium.com/idex/
The information above is provided for informational purposes only and shall not be construed as investment advice or as requests to engage in investment operations. Neither should it be construed as recommendations or advice on legal or regulatory aspects.
