Diatomix Pre-Seed Round Complete, ready to Start Hedging Impermanent Loss in 2023
DIATOMIX successfully completes pre-seed round to build its first product that allows liquidity providers to effectively hedge impermanent loss.
This week, Diatomix officially announced its first product that offers an innovative approach to hedging impermanent loss for liquidity providers.
Diatomix closed its pre-seed funding round on September 2, 2022, led by Borderless Capital. The round included 11–11 DG Partners, DG Global Ventures, and an angel investor. Diatomix was founded by venture studio Verum Capital, based in Zurich.
Verum Capital AG is a Web3 venture studio located in Zurich, Switzerland. Since 2018, Verum has collaborated with corporate, institutional, and start-up teams to bring blockchain-enabled products and services to life. With 10+ portfolio companies, 30+ projects, and 90+ engagements under their belt, the Verum team is working with VCs, Investors, and Network Foundations to create new, valuable DeFi products and ventures.
The Diatomix team is developing their solution on the Algorand Network in collaboration with the network’s DEXs, liquidity providers, and community. Diatomix will focus on creating a solution that can hedge impermanent loss, be easily integrated with DEXs, and drive adoption in the Algorand ecosystem. This product will allow liquidity providers to hedge their positions in a single step when they contribute capital to a pool.
Impermanent loss is the loss in portfolio value that commonly a liquidity provider suffers when they decide to contribute to a liquidity pool in automated market making platforms rather than simply holding their funds. This loss is incurred when a divergence in relative price between the two tokens creates an imbalance in a token pool. Because the liquidity pool endeavours to keep a token pair in alignment, it will sell appreciating assets and acquire depreciating assets, forcing liquidity providers to short appreciating assets and long depreciating assets.
Research conducted on Uniswap shows that after its V3 launch in May 2021, impermanent loss significantly outweighed fees earned by liquidity providers. From May to August 2021, Uniswap V3’s top 17 pools earned $190M in fees, but liquidity providers experienced $260M in impermanent loss. Overall, 50% of liquidity providers, regardless of investment skill level, were worse off than if they had simply held their crypto. According to research conducted by the Diatomix team, the impermanent loss born to Uniswap V3 liquidity providers translates to approximately $821M of economic losses for liquidity providers across all major DEXs in the same period. (1)
According to the Diatomix team: impermanent loss is a significant pitfall of liquidity provision. For retail investors, it can limit their economic opportunities as liquidity providers. If individual participation is disincentivized, the resulting concentration of capital could undermine a DEX’s purpose — to provide decentralized trading opportunities without an intermediary that profits as a market maker. By working with Diatomix, DEXs can maintain diverse liquidity pools, remain decentralized, and support the long-term health and viability of the DeFi ecosystem.
According to Borderless Capital CEO and Managing Partner, David Garcia:
“By integrating Diatomix natively within AMMs and DEX platforms, we believe that their smart trading and balancing layer will help to a more efficient, secure and productive DeFi markets in Algorand and will make the ecosystem even stronger and more competitive for traders, liquidity providers and users.”
Pact is a prominent DEX on the Algorand network and will be one of the first to integrate impermanent loss hedging for its users with Diatomix. According to core-contributor Dojo Dujoor,
“If this works as envisaged and promised, it will usher in the next generation of AMMs.”
About Diatomix
Diatomix is the first solution that allows liquidity providers to effectively hedge against impermanent loss. It is built on Algorand and, at launch, will be integrated with major DEXs on this network. The company was founded in 2022 by Verum Capital.
To get in touch with the team, email: info@diatomix.xyz
About Verum Capital
Verum Capital AG is a Web3 venture studio located in Zurich, Switzerland. Since 2018, Verum has collaborated with corporate, institutional, and start-up teams to bring blockchain-enabled products and services to life. With 10+ portfolio companies, 30+ projects, and 90+ engagements under their belt, the Verum team is working with VCs, Investors, and Network Foundations to create new, valuable DeFi products and ventures.
To get in touch with the team, email: info@verum.capital
About Borderless
Borderless Capital is a modern financial institution investing capital and co-building financial products that accelerate access, bootstrap adoption, and create value globally through the Algorand Borderless Economy. We do not stop with just investment. We also provide guidance and mentorship to grow our portfolio companies into successful and category leading businesses. As a thought leader in blockchain with deep expertise in the Algorand ecosystem, we advise our portfolio companies on go-to-market strategies to effectively build their network effect. In short, we leverage the synergy of our portfolio, partners network, and domain expertise to create value for everyone.
For more info: www.borderlesscapital.io
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