French DeFi exchange Mangrove DAO recently raised $7.4 million in Series A funds for its order book-based platform, which allows digital asset traders to preemptively execute smart liquidity offerings backed by digital contracts.
The Paris-based company invests the proceeds in actively pursuing research advances and improvements to its product.
The round was co-led by Cumberland and Greenfield Capital, with participation from CMT and gumi Cryptos Capital.
Mangrove’s decentralized finance platform executes smart contracts between DeFi liquidity providers and buyers. The main benefit of these smart contracts is that DeFi market participants can advertise agreed upon liquidity assets in their portfolio once a deal has been promised.
Mangrove envisages market trading with promised DeFi tied by smart contracts, allowing liquid assets to be shared, borrowed and lent and remain registered in the decentralized ledger until a matching supply is identified.
The concept has its roots in the traditional financial exchange model. Mangrove’s founders discovered that stock market “makers” did not use their own capital, but instead borrowed liquidity from the market, and they wondered – why not replicate this in decentralized finance?
An estimated $50 billion is locked in DeFi deals, leading to “capital use inefficiencies.” The dispersed nature of blockchain should mean that capital serves multiple functions and exists on multiple books at once, but the standard practice has remained of “locking capital across multiple unrelated liquidity pools” until now.
Mangrove says this means returns are underperforming and the cost of harnessing the capital remains stubbornly high.
“The collapse of FTX demonstrated that users value the capital efficiency of an order book exchange, but should not be required to trust a centralized provider,” the press release said.
“By replicating the capital efficiency of a centralized exchange in a trusted exchange, Mangrove helps address fundamental issues in the market.”
Gleb Dudka, Director of Greenfield Capital, said: “Mangrove solves these inefficiencies as the liquidity/collateral does not have to be on the CEX/DEX itself but can be sourced from another pool or DeFi protocol once the orders are received in the order book is.
“And the return can be generated elsewhere until the offer is accepted. In doing so, Mangrove disrupts one of the core tenets of DeFi — having to lock your liquidity in a protocol that hurts capital efficiency.”
The round follows a seed call in July 2021. Mangrove DAO’s investors at the occasion included Wintermute Ventures, QCP Soteria Node, Monday Capital, Noia Capital, Zeeprime, Atka Capital and Stake Capital.
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