FalconX, Bitmex founder Hayes invest in market maker Elixir amid dearth of providers

Decentralized finance protocol Elixir closed a $2.1 million seed round to allow anyone to participate in crypto market making. 

FalconX, Commonwealth, OP Crypto, ChapterOne and Bitmex founder Arthur Hayes are among those investors who participated in the round, the protocol said in a release.

Elixir is designed to enable anyone to participate in market making on both centralized and decentralized exchanges through a decentralized protocol. 

The protocol is raising money at a time when market making has faced scrutiny following the collapse of Alameda Research, once considered a leader in the space. Last year, FTX founder Sam Bankman-Fried was charged with fraud for allegedly misusing customer funds to prop up Alameda, which he also owned. In September, Bankman-Fried drafted an internal document exploring whether the market maker should be shut down, among the reasons was that Alameda wasn’t making enough money to justify its existence. 

Still, market makers have been attracting capital, with CyberX last week saying it raised $15 million in a Series A round to improve its proprietary risk management framework, which monitors on-chain and off-chain data in real-time. 

The round, which closed in the third quarter of 2022, will give Elixir around 24 months of runway, said Cole Petersen, head of operations at Elixir, in an email to The Block. The funds will be used to create a public testnet, which will enable anyone to spin up a validator, and to further build out its team of eight people, he added.

Bringing transparency to market making

Elixir is hoping to resolve the scrutiny facing market makers with a protocol that aligns incentives with projects and provides more transparency.

The lack of market makers following the collapse of FTX and high exchange costs have led to many projects holding off on launching tokens.

“Alameda was the go-to market maker for most projects, so founders now have to make a decision on who they trust, because a lot of them are still to announce they have been, or are close to being, wiped out,” said Oliver Blakey, partner and co-founder of Ascensive Assets, in a recent interview with The Block. His firm has made 89 investments across two different funds.

Elixir is working with top exchanges and projects to provide more transparent liquidity to central limit order book, said Philip Forte, Elixir’s founder and CEO, in a release.

“Projects will no longer be forced into paying predatory rates for crucial services, with Elixir helping build permanent and predictable liquidity bases for exchange pairs,” he said. 

The startup is also working on several integrations with decentralized exchanges and exchanges will also be able to directly integrate Elixir to enable retail participation in active algorithmic market making. The startup expects to launch its public mainnet later this year.

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