The big news of the week is that Coinbase has acquired Paradex for an undisclosed sum.
Paradex was one of the 0x relayers that launched on mainnet earlier this year. Their launch caused a bit of a stir
in the community as, unlike other relayers at the time, they took the very pragmatic view of avoiding the use of ZRX token for collecting fees (now others have followed suit apparently), using the 0x order matching
architecture. So Paradex is only 'decentralized' in that it's a non-custodial wallet-to-wallet trading platform, however they themselves are counter-party to all trades running a centralized order book. Dan Romero labelled
it a 'bulletin board', a la
The Paradex team only started working on it less than a year ago, and launched 3 months ago, so this was an incredibly quick exit that we suspect won't represent a material return for its backers Blockchain Capital and Pantera. So one wonders why such a rush for a DEX at the dawn of a category to tie up with one of the largest centralized exchanges. Paradox?
And Coinbase isn't the only centralized exchange entering the DEX arena, Binance is also building its own version. It's interesting to think about what the landscape will look like 3-5 years from now, and which DEXs will manage to carve out significant market share independently and how, if at all. No doubt Coinbase will push the regulatory agenda for everyone involved, having stated that they are looking to implement certain changes to allow US customers to use Paradex.
It's also intriguing to think about the possible implications for 0x governance, assuming Paradex continues to build on the protocol as part of Coinbase: if they start to funnel significant volumes through the platform, they presumably would want to ensure they have a say in how its smart contracts are upgraded going forward. And if Coinbase has a say, what's to stop other large exchanges to also secure their share of influence?
We are hoping to feature a Q&A with Paradex in next week's issue to shed some light into some of these questions, so stay tuned.