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Paradigm backs decentralized exchange protocol Uniswap

Uniswap, a rising star in the ethereum world, is being backed by crypto hedge fund Paradigm, sources close to the deal tell The Block.

As per The Block's sources, cryptocurrency hedge fund Paradigm was looking at investing over $1 million in the upstart firm as the lead investor in its seed round.

Uniswap is a decentralized exchange protocol, allowing any user with an Internet connection, a Metamask wallet, and some ETH (or ERC20 token) to seamlessly swap assets in a permission-less fashion. It was originally started as a side project of mechanical engineer Hayden Adams as he learned about Ethereum programming in November 2017. This fundraising round will allow him to expand the team, with Adams announcing that Uniswap has hired two full-time team members, bringing the team to 3.

The decentralized exchange space is crowded with AirSwap, 0x relayers, and Bancor all fighting over the same paltry volumes relative to their larger, centralized brethren. To be sure, such firms have attracted the attention of investors who are making a long shot bet that decentralized marketplaces will sit at the center of the market, rather than centralized players such as Coinbase and Binance.

Structured as a set of Ethereum smart contracts, Uniswap has some noticeable differences, and advantages, over more widely recognized ‘decentralized exchanges’ like those built on the infamous 0x protocol.

[related id=1]The first major difference is that Uniswap has a legitimate claim to the decentralized and censorship-resistant mantles, as my colleague Matteo Leibowitz recently noted.

Uniswap’s entire protocol exists as a set of on-chain smart contracts, leaving the matching and execution process solely up to miners. That differentiates it from other providers, such as 0x-based relayers, which match and execute orders on their private servers.

Uniswap has siphoned some volumes from competitors, seeing its market grow since the beginning of Q1, as per data from Alethio. Today, its platform sees more trading activity than five of its competitors that Alethio tracks.

Paradigm, founded by Coinbase cofounder Fred Ehrsam and former Sequoia partner Matt Huang, was launched at the end of 2018 with a mandate to provide investors with exposure in the cryptocurrency and blockchain space including both early-stage investments and liquid assets, per Bloomberg News. Citing an anonymous source, Bloomberg reported in October that the fund had raised $400 million with the backing of Yale University's endowment.

In addition to its investment in Uniswap, the fund has also invested in Tagomi Holdings, the cryptocurrency brokerage firm, and Numerai, another hedge fund.

Elsewhere, Sparkswap, another decentralized exchange, raised $3.5 million in a seed round led by Initialized Capital.