Why we invested in Krypton, a decentralized crypto exchange
Most decentralized finance (DeFi) trading volume is handled by automated market makers (AMMs), which tend to have hidden transaction fees since they make retail traders vulnerable to front-running and arbitrage by miners and other parties with an information and/or time advantage.
Krypton solves the issue of front-running in trading by executing trades as continuous streams over time. The decentralized exchange gives traders the flexibility to choose their desired trading speed or allow Krypton’s trade engine to provide an optimized speed – and sets the supply/demand equilibrium based on price and speed instead of price and quantity, to optimize execution for traders without special information. The Krypton Protocol is resistant to miner extractable value and protects traders and market makers from slippage and impermanent loss since it limits the negative impact from market participants with an informational advantage. This results in better trading economics for individuals and institutions.
We invested in Krypton because it has the potential to disrupt the decentralized exchange (DEX) industry with its innovative order book tool that spreads out a trade over time, and because it solves the front-running problem of miners choosing the order of transactions when they produce a block.
Until recently, Krypton’s solution was not economically viable because continuously updating an order book for the price/time equilibrium on-chain is expensive. But the company is solving these challenges by using scaling solutions from Chainlink. The Krypton protocol facilitates taking complicated computations off-chain, which lowers costs for traders, and is positioned to scale by harnessing the computational resources of Chainlink’s Decentralized Oracle Nodes network.
Samsung Next participated in a $7 million seed round led by Framework. Other investors included HashKey Capital, Finality Capital Partners, Foresight Ventures, GSR, a crypto market maker, and MEXC, a crypto exchange, also participated in the oversubscribed round.
The Krypton team has developed a viable proof of concept and expects to generate revenue based on trading volume. They include Michael Nowotny, co-founder and CEO. Michael is a financial economist and former business school professor specializing in asset-pricing. He also has experience as a quant in the asset management industry. Nathan Moore, co-founder and COO, was previously director of Performance engineering at Stackpath, and has experience at Subspace, and MaxCDN. Pierre-Olivier Weill, an Advisor, is a professor of economics at UCLA. Pierre and his PhD students are honing Krypton’s market-making algorithms and helping to optimize its trading mechanisms.
Only a fraction of crypto transaction volume today is handled by decentralized exchanges, but that is expected to grow rapidly. As volume increases, demand should also grow for Krypton’s continuous batch auction engine. While its long-term success is not dependent on Chainlink, Krypton has the potential to become a critical DeX in Chainlink’s Cross-Chain Interoperability Protocol (CCIP) ecosystem.
Carlos Castellanos is a Samsung Next Investor. Samsung Next's investment strategy is limited to its own views and does not reflect the vision or strategy of any other Samsung business unit, including, but not limited, to Samsung Electronics.