Paradigm is a decentralized finance (DeFi), offering cutting-edge liquidity solutions and new trading tools. It intends to bridge the gap between various liquidity sources by providing tools such as Unified Markets and RFQ (Request for Quote), which aggregate liquidity from several decentralized exchanges and blockchains. Paradigm improves the trading experience by optimizing order routing, reducing slippage, and ensuring easy access to deep liquidity. The platform empowers traders, institutions, and developers by providing access to a wide range of digital assets, increasing efficiency and transparency in the DeFi ecosystem.

What is Paradigm?

Paradigm is a liquidity network for crypto derivatives traders that provides access to multi-asset, multi-protocol liquidity via centralized (CeFi) and decentralized financing (DeFi) platforms to deliver a consistent, non-custodial trading experience. Paradigm operates an institutional liquidity network for crypto derivatives traders and crypto protocols in the CeFi and DeFi ecosystems. The platform gives traders and crypto protocols unified access to multi-asset, multi-protocol liquidity on demand without sacrificing execution preferences, costs, or speed. The company aims to provide a platform allowing merchants to trade anything with anybody and settle anywhere. Paradigm works to understand its users’ demands truly and to articulate the problem they are fixing correctly.

Paradigm aims to operate as a network for the liquidity of various assets by integrating exchange platforms, protocols, and agents to serve as a hub for accessing liquidity across several platforms and facilitating user exchange. Paradigm’s plans include mechanisms for debiting user accounts and derivatives in DeFi. This is a critical step toward developing an entire financial system and its inclusion into the crypto ecosystem. Paradigm offers the largest network of institutional counterparties in cryptocurrency, with over 700 institutional clients trading more than $10 billion monthly, including hedge funds, OTC desks, lenders, structured product issuers, market makers, and notable family offices.

Background of Paradigm

Paradigm was created in 2016 by Anand Gomes and Michal Koonin and is headquartered in Singapore. Anand Gomes is Paradigm’s co-founder and CEO, and Michal Koonin is its co-founder and SVP of Operations. He attended the Weatherhead School of Management at Case Western Reserve University. Michael Koonin attended DePaul University. Gomes and Koonin are traditional finance veterans who had previously worked on trading floors for KeyBanc Capital Markets and Wolverine Trading.

In December 2019, Paradigm announced the completion of a $35 million Series A fundraising round. Jump Capital and Alameda Ventures led the funding round, which valued the company at $400 million. Over 25 investors participated in Series A, including Genesis Trading, QCP Capital, Nexo, Optiver US, IMC, GSR, Akuna Capital, Babel Finance, MGNR, Avon Ventures, CMT Digital, Goldentree Asset Management executives, and Amber Group. Investors from past seed rounds included Dragonfly Capital, Digital Currency Group, Vectr Fintech Partners, Mirana Ventures, Bybit, and BitDAO Venture Partners.

Jump Capital, Dragonfly Capital, Digital Currency Group, Genesis Trading, QCP Capital, Nexo, Optiver US, IMC, GSR Markets, Akuna Capital, MGNR, Avon Ventures, CMT Digital, Pattern Research, Vectr Fintech, Amber Group, and some of the OTC markets’ most influential private investors are among Paradigm’s backers.

Features of Paradigm

Paradex

Paradex is a decentralized exchange (DEX) based on the paradigm liquidity network. It was created to alleviate the liquidity fragmentation issue in decentralized finance (DeFi) by allowing efficient cross-chain trade. Paradex combines liquidity from decentralized exchanges (DEXs) to provide an aggregated liquidity pool for more efficient trades. It enables users to perform trades directly from their wallets, eliminating the need to rely on centralized exchanges and providing a decentralized option for trading digital assets. Paradex aims to improve trade execution by routing orders through several liquidity sources while minimizing slippage. Paradex Chain is a general-purpose smart contract platform driven by CairoVM. It shares state with Paradex Exchange, allowing for a composable, high-throughput execution environment where on-chain applications can smoothly engage with the deep liquidity infrastructure.

Paradex was created because CeFi risk engines lacked a uniform framework for reliably measuring risk across a portfolio of assets. This means that margin requirements on most exchanges may not accurately reflect a user’s portfolio risk. As a result, users are penalized with increased capital needs. Furthermore, most DeFi exchanges suffer from a chronic lack of “real” user flow and lag behind their CeFi counterparts in terms of liquidity and trade volume.

Benefits of Paradex

• Paradex aggregates liquidity from many blockchains, allowing you to trade across decentralized platforms and ecosystems.
• Paradex employs clever order routing algorithms to identify the best prices across various DEXs, reducing slippage and boosting trade execution.
• Paradex is a fully decentralized platform that gives users complete control over their private keys and assets during trading.
• The platform focuses on making cross-chain trades more fluid for users, allowing them to create complex deals without browsing several interfaces.
• Paradex’s decentralization often allows for lower fees than centralized exchanges while providing a more secure trading environment.

Paradex is an integral part of the more extensive Paradigm liquidity network. It helps create a more cohesive DeFi ecosystem by integrating liquidity across several platforms and making decentralized finance more accessible and efficient for traders and liquidity providers.

Paradigm RFQ (Request for Quote)

Paradigm RFQ (Request for Quote) is a function of the Paradigm platform that allows you to request and provide quotes for large or complex trades in the decentralized finance (DeFi) ecosystem, especially for assets that are difficult to trade or have little liquidity. An RFQ (get-for-quote) is an electronic communication made to a preferred counterparty (maker) to get a price quote for a specific option or futures strategy. An RFQ can specify the clearing venue, product, and instrument type, plan, and account or sub-account. It can also be a multi-legged spread or a single instrument.

Traders can use Paradigm to send a request to liquidity providers (LPs) detailing the asset they want to trade and any unique circumstances. In response, liquidity providers (such as institutional market makers) issue a quote depending on their available liquidity and the trade size requested. The RFQ method enables traders to negotiate and determine the best possible price for a given asset or trade size, particularly in markets with low liquidity or when conducting larger trades that may affect pricing on traditional DEXs. When traders receive a suitable quote, they can accept it, and the trade is performed directly with the liquidity provider, avoiding the typical slippage and order book concerns associated with decentralized exchanges.

Complex Order Book (OB)

A paradigm complex order book (OB) is a publicly available collection of all buy and sell orders for a specific crypto derivative structure that traders may use to determine market demand and supply and the price at which others are ready to purchase or sell. The order book supports partial executions by matching a piece of a trader’s order with one or more available orders on the opposite side of the book, allowing for execution against multiple counterparties. Large orders can be placed on the book as a limit order and wait for execution. For instance, if users want price discovery without showing their size, OBs allow them to see generally where the market is pricing your structure. If the levels are reasonable, you can execute directly on the order book or spin up an RFQ.

Paradex Chain

Paradex Chain is a decentralized perpetual exchange (DEX) based on the Starknet Appchain that supports self-custodial trading and an on-chain risk engine geared for capital efficiency. The StarkEx development team, Starkware, is a major partner and critical technology provider for the project. Starknet is a roll-up chain that uses zero-knowledge proofs to publish L2 state change proofs, which L1 contracts check as accurate using L2 business logic. Paradex Chain is a general-purpose smart contract platform driven by CairoVM. It shares state with Paradex Exchange, allowing for a composable, high-throughput execution environment where on-chain apps can interact seamlessly with the deep liquidity infrastructure developed. The CairoVM is a specialized virtual machine created exclusively for validity-proof systems (ZK-Rollups), free of the constraints of EVM-based designs.

A Rust-like language, Cairo is used to write smart contracts that optimize the efficiency of STARK-proof-based computation for Ethereum scaling. Starknet’s Cairo language developers use a fixed precision of 8 decimal places by multiplying all numbers by (10^8) to convert them to integers. For example, the price of ETH-USD-PERP at $3,309.33 would be multiplied by (10^8) to become 330,933,000,000, allowing operations with integers rather than decimals. The system uses these integers to ensure accuracy and consistency when creating order signatures. The protocol requires that all interactions be conducted with numbers, excluding API values. Paradex accounts have an owner key and a guardian key to improve security. Users can further safeguard their Paradex CLI accounts by adding Guardians and Backup Guardians and controlling transactions with multiple signatures.

Paradex Chain uses a Proof of Asset-Based Consensus (PoABC) technique that combines aspects of Proof of Stake (PoS) and Proof of Authority (PoA) to validate transactions and protect its network. Validators stake tokens to participate in block production, and the most bonded applicants are chosen to create blocks. This technique improves the blockchain’s security, stability, and finality. Paradex Chain is not entirely PoS; it blends PoS and PoA techniques to produce a unique and secure consensus model for its blockchain. Regarding performance parameters, Paradex Chain has a throughput of 10,000 transactions per second (TPS) and a latency of about 1 second. The PoABC consensus method makes this high performance possible, allowing for shorter block times and reduced fees. Paradex employs several safeguards to ensure secure fund management, including blocking deposits from L1 and limiting withdrawals from L1 and L2. Validators invest tokens on the Paradex Chain to participate in block generation. The network chooses the most bonded candidates to produce blocks, resulting in a hybrid consensus method that relies on staking and authority-based validation.

Products of Paradigm

Unified Markets

Paradigm Unified Markets is a product of Paradigm. This product aims to connect various liquidity pools and trading venues inside the decentralized finance (DeFi) ecosystem to create a uniform, seamless trading experience. This product increases the accessibility, efficiency, and liquidity of digital asset markets by collecting liquidity from different sources and allowing users to make transactions across multiple protocols and platforms using a single interface. Paradigm Unified Market provides on-demand auctions using RFQs and complicated order books for any instrument or strategy. This solution allows customers to rapidly obtain two-sided quotes from liquidity providers for large, sophisticated, multi-leg, strategy-sized trades and trades visibly or anonymously. Users can also create sophisticated order books on-demand for any strategy. Resting a limit order allows you to hit the bid, lift the offer, or increase the price.

Features of Paradigm Unified Markets

Liquidity Aggregation: Unified Markets brings together liquidity from numerous decentralized exchanges (DEXs), liquidity pools, and even centralized exchanges, giving traders access to a larger liquidity pool in one place. It enables seamless trading without manually switching between different liquidity sources, a common difficulty in traditional and DeFi markets.

Smart Order Routing: The Unified Markets product employs smart order routing technology, automatically sending a trader’s order to the most appropriate liquidity sources. This reduces slippage and ensures the best possible execution price. This method ensures that traders can trade effectively by determining the best route for their orders, regardless of whether the liquidity originates from a DEX, AMM, or other decentralized platforms.

Cross-Chain Integration: Paradigm Unified Markets can aggregate liquidity across many blockchains, allowing users to trade assets across different ecosystems without manually bridging or swapping. For example, a trader may desire to exchange an Ethereum-based token for a Binance Smart Chain (BSC) token, and the platform manages the complexities of getting liquidity from both blockchains.

How to Use Paradigm Unified Market

• Choose the icon from the left-hand sidebar of their Paradigm program.

• Users must set up the necessary permissions to read your positions from the venue. Deribit: Allow Trade: read-only scope for your API key.

• Check their admin dashboard to ensure that all permissions are correctly configured. They should see a green check beside the API key in the image.

• Users should now see their venue positions on the Positions tab. Positions are automatically refreshed. The timer in the top right corner of the Positions tab represents the refresh interval.

• RFQ and OB buttons allow users to produce an RFQ or Complex Order Book right from their positions.

Delta-1 Spreads

Paradigm’s Delta-1 Spreads are streaming order books that allow traders to easily trade the spread between various Delta-1 instruments such as spot, perpetual, and futures contracts. This feature enables the simultaneous purchase and sale of related contracts, allowing techniques like arbitrage and hedging. Paradigm’s Delta-1 Spreads offers traders efficient execution, lower costs, and increased liquidity for complicated trading techniques in the cryptocurrency derivatives market.

Paradigm’s Delta-1 Spreads offering enables traders to trade perpetual funding rate (spot against perpetual) and basis (spot vs. future) strategies, as well as roll their hedges (perpetual vs. future) on a single exchange with no legging risk. The program also supports streaming order books for trading spreads between any Delta-1 asset (spot, perpetual, or future).

Paradigm expanded its cooperation with Bybit to include USDT-margined Delta-1 spread trading. This agreement enables users to trade spreads between USDT-margined spot and perpetual instruments spanning 25 cryptocurrencies with a single click without affecting Bybit’s order books or introducing leg risk. Furthermore, fees on the spot leg of these spread trades are waived when performed using Paradigm and settled via Bybit.

Features of Delta-1 Spread

• Dedicated Spread Liquidity: Paradigm sources liquidity directly from its broad network, ensuring deep and spread-specific liquidity without the need for exchange order books.
• Reduced Fees: Through partnerships with exchanges such as Bybit, Paradigm offers spreads performed on its platform with no fees on the second leg, resulting in up to 50% lower fees than typical screen trading.
• Atomic Execution: The platform ensures atomic execution of both legs in a spread deal, reducing the risks associated with legging into spreads and increasing trading efficiency.

How Does Delta-1 Spread Work

Delta-1 Spreads Table

• Choose the Delta-1 Spreads icon from the Paradigm application’s left-hand sidebar.

• At the top, filter the table by Asset and Venue.
• At the top, filter the table by Asset and Venue.
• The table displays spreads as a combination of rows and columns.
• All Delta-1 spreads are active. Traders can quote or execute any of the current Delta-1 spreads.
• All Delta-1 spreads remain anonymous. No desk information is transmitted to the counterparty.

Post a Market Order

• Select the Bid or Ask button in the Delta-1 Spreads box.
• Select Market from the menu on the right side, just underneath Strategy Details. By default, the window opens with the Limit order selected.
• Enter the quantity.
• To swap sides, click the Swap button.

Prime Dealers

Paradigm Prime Dealers are the only market makers on the Paradigm platform. This cryptocurrency derivatives trading platform provides crypto traders institutional liquidity and deep options liquidity. Prime dealers offer the liquidity of the most extensive option available in crypto. Paradex Prime Dealer is a fundamental component of the Paradex ecosystem that aims to bridge traditional and decentralized finance (DeFi). Prime Dealer supports trade interchange, liquidity, and execution over the Paradex network. Prime Dealers frequently play an essential role in the infrastructure of decentralized financial networks, enabling liquidity, market making, and fast trade execution. They are in charge of linking institutional traders and high-volume participants with decentralized platforms.

Prime dealers offer the most extensive liquidity options available in the cryptocurrency market, allowing traders to make huge deals with minimal price impact. Paradigm provides a unified interface for traders to view, manage, and execute deals, including RFQs and complex order books. Paradigm intends to give traders institutional-grade liquidity, allowing them to perform complicated strategies and access deeper markets. While the specifics of Paradex Prime Dealer operation may vary depending on the larger ecosystem and the Paradex platform, this role is typically critical in ensuring that the network remains liquid, accessible, and capable of handling large transaction volumes while maintaining high security and operational efficiency.

The Paradex Prime Dealer has numerous critical features that aim to bridge the gap between traditional and decentralized finance (DeFi) while maintaining high liquidity, efficient trading, and secure market operations. Aradex Prime Dealers offer liquidity to the Paradex network, ensuring adequate capital for large deals and seamless transaction execution. They help stabilize the market by acting as buyers and sellers, increasing market depth, and lowering price slippage. Market making is the responsibility of prime dealers, who maintain buy and sell orders on both sides of the order book to keep markets active at all times. This functionality allows customers to exchange assets without substantial delays or liquidity constraints. Paradex Prime Dealers frequently bridge the gap between institutional traders and decentralized platforms, providing access to high-volume transactions that would otherwise be impossible to execute in a decentralized environment.

Conclusion

Paradigm serves as a liquidity network for cryptocurrency derivatives traders, serving centralized and decentralized finance sectors. Paradigm is a network that aims to reduce market spread while increasing liquidity through the growth of integrated technology. As a result, users may find it easier to participate in the crypto market, and liquidity spreads may narrow. Paradigm provides a market for institutional investors who trade options or spreads by addressing issues with traditional over-the-counter (OTC) trading.