Contango raises $4M in a round led by ParaFi to bring “expirable” futures to DeFi
14/07/2022 — Contango, a unique decentralized exchange (“DEX”) offering expirable futures (i.e. instruments with a known settlement date), has announced today that it raised a seed round of $4M at a $45M valuation in December 2021. The round was led by ParaFi, with participation from incubators dlab, Advanced Blockchain AG, as well as investment funds Coinbase Ventures, Spartan Group, AngelDAO, and trading firms Cumberland, GSR, Amber Group and CMS. The project is currently incubated at Alpha Venture DAO.
Angels include: Juan and Andrew (MakerDAO); Michael (Fantom Foundation); Mika (ex ParaFi); Windra (Element Finance); Yenwen (Perp Protocol); Brainjar (Composable Finance); Dim and Nick (Symbiosis Finance); Francesco (Superfluid); Alex (deBridge); Mirza and Eric (Vessel Capital); Wil (Jet Protocol); BlockVenture; Joshua (SCC Investments); Larry (The Block); Brian (Solidity Ventures); Dave (Crypto Tunez); Nicolas (SwissBorg); Julien (Stake Capital); Loïc (Adaptive Financial Consulting); DeFi Dad.
Contango, born in the summer of 2021 at Hackmoney, is building the first open-source DEX to offer expirable futures without an order book or liquidity pools. To achieve this, Contango leverages existing DeFi (“Decentralized Finance”) protocols that offer fixed-rate lending and borrowing, such as Yield and Notional. When a trader opens a position on Contango, the protocol borrows on the fixed-rate market, swaps on the spot market, then lends back on the fixed-rate market. At expiry, the protocol offers physical delivery, as this removes any possibility of price manipulation.
The market opportunity for Contango is huge: the volume of derivatives traded on centralized exchanges (“CEX”), on both expirable and perpetual futures, exploded in 2021. However, DeFi protocols have only launched perpetual products and that leaves Contango as the market leader in the expirable space.
“Futures with an expiry date are non-existent in DeFi, yet they are critically important” says Kamel Aouane, CEO and Co-founder of Contango. “In contrast to perpetuals, they have a settlement date and thus traders are not subject to the unpredictability of funding fees.”
The availability of linear and inverse contracts, as well as the fact that each trading position is synthetized as an NFT, allows for further integration with other protocols. Other teams can build freely on top of Contango and create new financial products, automating otherwise complex trading strategies, such as “cash and carry” trades. Contango plans on creating a community of builders by sponsoring these kinds of hackathons in the future.
By taking advantage of liquidity pools of underlying fixed-rate markets, Contango is able to offer the same order of magnitude of liquidity and price impact as major centralized exchanges.
Being the first DeFi protocol that prices futures with interest rates, Contango’s team expects traders to take advantage of arbitrage opportunities between its own platform and major centralized exchanges, such as Binance. “It will be interesting to observe the evolution of the derivative space and Contango’s contribution to price alignment between CeFi and DeFi” concludes Aouane.
Anjan Vinod, Vice President of ParaFi, explains why they decided to invest in Contango: “We were quickly impressed with the team’s understanding of core DeFi primitives and the challenges traders currently face. Leveraging its integrations with fixed-rate markets, Contango aims to scale its liquidity base and provide predictable upfront pricing for traders. We’re excited to support the Contango team and ecosystem.”
Contango is currently undergoing security audits and plans on launching a beta later in the summer. Users can already sign up to get early access by visiting contango.exchange.
About Contango
Contango is bringing expirables to DeFi. Buy or sell assets at a set price and date in the future without order books or liquidity pools. When a trader opens a position, the protocol borrows on the fixed-rate market, swaps on the spot market, then lends back on the fixed-rate market. Contango offers physical delivery and a minimal price impact for larger trades. Join us at contango.xyz.
