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Polychain, Dragonfly-backed DeFi project Paradigm Labs is shutting down

Celia Wan

Paradigm Labs, a decentralized finance (DeFi) project backed by Polychain Capital, Dragonfly Capital, and Chapter One Ventures, is shutting down. 

Announcing the news on Tuesday, CEO Liam Kovatch said the decision was made due to a failure to identify product-market fit and a lack of funding. 

"After almost two years of active research and development, our team has come to the decision that without significant product-market fit and limited resources to pursue emergent opportunities, the kind of success we envisioned for Paradigm Labs is unlikely," Kovatch wrote in the post. "Out of respect to all of our stakeholders, we assessed this situation as quickly as we believed we could responsibly do and converged on the decision to sunset the company." 

Founded in 2018, the company raised a seed round of undisclosed amount during the same year to develop a liquidity aggregation protocol for decentralized exchanges (DEX).

However, after nearly a year of research, the team found this product, Kosu, could not adapt to the fast-changing market structure of DEX. Meanwhile, the investment Paradigm Labs had committed to Kosu also made it hesitated to pivot to its second product, Zaidan, a request-for-quotation system built on the DEX project 0x. 

"Many of our early efforts and investment on the Kosu project were made obsolete by broader developments in DEX market structure. The idea for Zaidan, our non-custodial RFQ system, came to us late in the company's life cycle at which point we were under-resourced to fully develop Zaidan," Kovatch said. 

Although promising, bringing the Zaidan protocol live has proven costly, according to the company, and Paradigm Labs was unable to secure new funding to pursue such endeavor. As the company closes its door, it is also sunsetting its ZRX staking pool, which the firm originally established to fund Zaidan's operation.

On March 16, the staking pool will stop collecting payouts from the 0x protocol, and the team advises users in the pool to remove or re-allocate their stakes. 

"For the remainder of March, the team's priority is ensuring a smooth wind down of the project and company. This includes active communication with those affected and the business operations necessary to the legal dissolution of the company," Novatch stated.