Darren Kleine

Arbitrum is where the action is, according to Vertex co-founder, Alwin Peng.



The decentralized trading platform has settled into its new home on the Ethereum-based layer-2 network, bidding farewell to the Cosmos appchain environment earlier this year.



Peng pulls no punches when asked about the decision to relocate. “From the perspective of a team trying to build a product that actually has users, “ he says, “Cosmos didn&#8217;t seem like it was going to make it.”



He points out that “all the top blockchains” run on the Ethereum Virtual Machine (<a href="https://blockworks.co/tag/ethereum-virtual-machine">EVM</a>) with the majority of total value locked (TVL) residing in the Ethereum ecosystem. Building on <a href="https://blockworks.co/tag/arbitrum">Arbitrum</a> has a “really good chance of being able to build on something and having that work matter,” according to Peng.



Speaking to Blockworks on the 0xResearch podcast (<a href="https://open.spotify.com/episode/09tVo8N7sjNo7rAejcSdRv">Spotify</a>/<a href="https://podcasts.apple.com/us/podcast/vertex-built-for-cross-margin-low-latency-trading-darius/id1651683074?i=1000624664334">Apple</a>), Peng explains that when the Vertex protocol transitioned to Ethereum, Arbitrum “happened to be the most performant EVM chain at that time that also had TVL.”



The Vertex decentralized exchange is “capital efficient” as well as fast and easy to use, he&nbsp; says. Users can trade on Vertex “as if you would trade on a centralized exchange,” according to Peng.



Vertex, he says, is “something that looks like a centralized exchange, feels like a centralized exchange, but just so happens to be decentralized.”



Peng emphasizes that while users maintain custody of their assets, the exchange does centralize certain aspects of its offering to ensure rapid trading performance. “We can process all trades and order placements optimistically on our own server and that way, you&#8217;re not waiting for a light to travel from different nodes to each other and all of them to reach consensus.”



“Centralized servers are fast — and we like that,” he says.



<h2 class="wp-block-heading">Cross-chain messaging for multi-chain trading</h2>



Vertex co-founder Darius Tabatabai says that the team would like to be able to provide assets across multiple chains at some point in the future. “Logically,” he says, “you want all your liquidity and trading to be happening in one place.”&nbsp;



“You want all your capital on each account to be accounted for in one place as well to keep the capital-efficiency.”



For this reason, Tabatabai rules out a <a href="https://blockworks.co/tag/uniswap">Uniswap</a>-style model “where you just fork the code and put a different version of the code on 20 different chains.” Instead, he anticipates using a cross-chain messaging service. <a href="https://blockworks.co/tag/wormhole">Wormhole</a> interoperability technology could bring in assets, take deposits on different chains, and bring them to Arbitrum, where user accounts would interact with the Arbitrum instance of the protocol, he explains.



“Any time they want to withdraw,” he says, “they withdraw to their home chain.”



“It&#8217;s quite a big piece of work,” Tabatabai admits, “but [Peng] is probably the guy to do it, given that he worked on Wormhole previously and has exposure to this from previous roles.”



“We haven&#8217;t got the exact plan mapped out, but we&#8217;re pretty confident we can do something decent in that space.” 



<iframe loading="lazy" frameborder="0" height="200" scrolling="no" src="https://playlist.megaphone.fm/?e=BWG8645394583" width="100%"></iframe>







Peng explains how performance would be maintained in a cross-chain environment. “Most of the things that people sign don&#8217;t end up on-chain,” he explains. “It just goes to our matching engine directly.”



Peng uses an example of a user moving from the <a href="https://blockworks.co/tag/optimism">Optimism</a> chain to trade on Vertex, illustrating the “ideal user experience.”&nbsp; The user would send the transaction on Optimism to make a deposit and on the backend, it would be bridged to Arbitrum. “They are not exposed to the bridge in UX, at all.”



It might take around two minutes, according to Peng, for the assets to switch over to <a href="https://blockworks.co/tag/arbitrum">Arbitrum</a>, “and then after that, they can just trade normally, <a href="https://blockworks.co/news/simplify-crypto-user-experience">as if it was a centralized exchange</a>.”



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Vertex protocol founders consider cross-chain trading solutions

Casey Wagner

<div id="highlights-block_62671db880729" class="highlights">
 <ul>
 <li>Hack VC and Dexterity Capital led the round</li>
 <li>The protocol hopes to be the first on the Terra blockchain to operate an on-chain orderbook with the automated market maker framework</li>
 </ul>
 
</div>



Vertex Protocol, a decentralized FX protocol for multi-currency spot and derivatives trading, has closed an $8.5 million seed funding round ahead of its planned launch this summer.



<a href="https://www.crunchbase.com/organization/hack-vc" target="_blank" rel="noreferrer noopener">Hack VC</a>, the $200 million crypto seed fund headed up by Alex Pack and Ed Roman, and Dexterity Capital led the round. Other investors include Jane Street, Hudson River Trading, GSR and Huobi. 



“We are excited to partner with some of the top trading firms in the space alongside VC partners with deep knowledge in scaling new protocols,” Alwin Peng, co-founder of Vertex, said. “The capital and expertise provided will help propel our team forward and put Vertex at the forefront of [multi-currency] DeFi innovation.”



Currently, more than 99% of DeFi (decentralized finance) liquidity lies in US dollar-tied stablecoins, a spokesperson from Vertex said. While non-USD stablecoins exist, no viable protocol allows for trade between various fiat-linked tokens, which has hindered adoption and utility, the spokesperson added.



International traders looking to hedge currency risk between USD-denominated DeFi investments and their local currencies currently have few options for liquidity, and the Vertex team is hoping to change that.&nbsp;



“As one of the largest liquidity providers in crypto, we recognize the potential of this protocol to contribute towards a vibrant market for investors worldwide,” Michael Safai, managing partner at Dexterity Capital, said. “We believe these products have a place in many DeFi portfolios, which is why we’re taking an approach to investment that will help ensure liquidity and growth for Vertex far beyond launch.”



Vertex plans to be the first decentralized trading protocol on the Terra blockchain to operate an on-chain orderbook with the automated market maker (AMM) framework. The protocol, once launched, hopes to provide traders with perpetual swap offerings and a borrowing and lending facility with flexible collateral options.



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.