Huobi And Coinbase Invest In Decentralized Exchange CoFiX
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Decentralized finance (DeFi) protocol CoFiX has received $500,000 in funding support from Huobi DeFi Labs, Dragonfly Capital, Coinbase Ventures, and several other DeFi angel investors.
Founded in March this year, CoFiX is an advanced automated market-making protocol. It obtains market prices decentralized price oracle NEST Protocol. Unlike other oracle solutions, NEST Protocol provides a collection of innovative financial parameters including double options, price chain, and beta coefficients, which together enable the protocol to effectively verify prices and generate arbitrage-free on-chain price feeds.
CoFiX said that by using a decentralized price oracle, all trades are executed based on the market price. Market makers always sell their assets at the market price plus a computable compensation, because in so doing, they can be accurately compensated for the risks they take. Traders always trade at market prices, with a spread given to the market maker for risks that they have taken. Since the market prices come from an oracle, neither arbitrageurs nor their “services” are needed.
As all trades are executed based on the market price, market makers are able to perfectly hedge their position to lock in profits from the price spread. When a market maker deposits liquidity into a pool, they are able to know their share of the pool and mirror the trades proportionally on a third-party service. The amount to hedge is in proportion to the market makers’ share of the pool. For example, if the total pool size is 1,000 ETH, and the market maker owns 10% of that pool, they simply need to mirror 10% of the volume of the trades that occur. This is achievable via a simple programmable script. Arbitrageurs are no longer necessary to rebalance the pool, and there is no impermanent loss.
“CoFiX is trailblazing a new path in DeFi with an innovative solution that can truly attract institutional traders and market makers to the space” said Sharlyn Wu, Huobi Chief Investment Officer and Head of Huobi DeFi Labs. “It leads DeFi into a new chapter of ‘Computable Finance.’ The Huobi DeFi Labs is thrilled to support the team.”
”When I saw how CoFiX improved on the vanguard of AMM design, I got incredibly excited,” said Haseeb Qureshi, Managing Partner at Dragonfly Capital. “DeFi is all about building on the great ideas that came before you and taking them one step farther. CoFiX is a beautiful innovation on top of traditional AMMs. It’s also one of the truly thoughtful community-driven DeFi projects from the East. We’re excited to help usher them into the global DeFi community.”