- Disappointing moment for the DeFi sector as the ambitious DeFi liquidity project, Paradigm labs shut down
- Paradigm CEO believes capital constraints were at the heart of the decision to dissolve the company
- DeFi is set to grow in 2020 as more industries embrace its ability to boost operational efficiencies
On March 10, 2020, decentralized finance liquidity provision project, Paradigm Labs, announced via a blog post that they have unfortunately been forced to wind down. They cited their early entry into the decentralized exchanges (DEX) ecosystem and the inability to build a resilient business as the prime reason for their imminent shutdown.
According to the Medium post, the project will be legally dissolved by the end of the month. Anyone can ask questions on their Discord Channel until April 1, 2020.
The project began in 2018 with stark ambitions of improving the state of DEX liquidity and was promised as a potential game-changer for DeFi and crypto.
Two years later, the team has struggled to build a sustainable business and decided that instead of sinking more resources into the firm, winding down was the best plan of action.
Paradigm Labs offered two distinct products: Zaidan and Kosu. While Zaidan saw some degree of success, Kosu was riddled by trade-offs.
Paradigm Labs Fails to Find Market Fit
As outlined by Liam Kovatch, CEO, and founder of Paradigm, the timing, hesitation to pivot, and capital constraints were at the heart of the decision to dissolve the company.
In terms of timing, the CEO believes they were unlucky as the decentralized exchange space witnessed several developments such as the launch of Uniswap, the establishment of the decentralized finance (DeFi) movement, and more. All that made the DEX space incredibly fluid and challenging for an organization like Paradigm Labs to navigate.
The DeFi Company initiated its development with a liquidity aggregation protocol for DEX – Kosu – which the team found to be obsolete after a year due to the changing market structure of DEX.
The project also raised an undisclosed amount in a seed round in the same year of its launch and is backed by well-known venture capitals, including Polychain Capital, Dragonfly Capital, and Chapter One Ventures.
Despite some of the projects – particularly Zaidan – being promising, their development process eventually proved too costly, forcing the startup to shut it abruptly.
The State of DeFi in 2020
DeFi has become one of the critical growth areas for Ethereum (ETH) since 2019. Other competing blockchains are also building DeFi products, yet at a much slower pace.
DeFi refers to financial software that is built on the blockchain to make it simpler for developers to develop digital currencies and financial smart-contracts.
The closure of the Paradigm DeFi project seems like a bump in the road, but the sector will likely grow exponentially in 2020. In fact, DeFi has the potential to increase innovation as well as improve operational efficiencies in various ways.
As DeFi applications continue to expand across different sectors, more and more investments are gradually being directed into the DeFi ecosystem.