Arwen raises $three.3M to bring non-custodial trading to centralized exchanges
Arwen, a blockchain infrastructure firm that permits self-custody trading from centralized exchanges, raised $three.three million led by Slow Ventures with participation from CoinShares, Collaborative Fund, Underscore VC, and DG Lab Fund.
We detailed how Arwen works in a professional analysis report final summer season:
This is achieved through an escrow mechanism the place the person sends funds to a Hashed Time-locked Contract (HTLC). They then ask the trade to do the identical and pay a charge so as to compensate the trade for locking up their tokens. The person can then commerce throughout the escrows with every particular person commerce being executed atomically. Whenever the person needs to withdraw their tokens they will, and as long as the escrow is closed earlier than the time expires their tokens are protected. If time expires earlier than the person closes the escrow their funds face the identical safety dangers as another tokens on an trade. However, at any cut-off date the person can re-escrow the funds or withdraw them altogether.
Source: Arwen Blog
The protocol at present helps BTC, LTC, and ETH on KuCoin and the workforce is in talks to add extra institutional companions. They additionally imagine that this expertise can lengthen to extra than simply crypto exchanges because the clearing and settlement course of within the conventional world comes with its personal dangers and inefficiencies that may very well be alleviated utilizing Arwen.
Why it issues
Crypto exchanges have been hacked for round $300 million final yr. With Arwen’s escrow mechanism merchants don’t want to deposit funds with the trade eradicating the danger of loss due to a hack. This has lengthy been a core worth proposition of decentralized exchanges, nonetheless, this turns into broken as Arwen not solely provides non-custodial trading however entry to order-books with orders of magnitude extra liquidity. Unless DEXs can discover a approach to compete on different options Arwen might considerably hamper their long-term progress.
The world of Open Finance has understandably steered away from centralized exchanges, however this new mannequin for interacting with them extra trustlessly might probably change that. By bridging the hole between the 2 worlds, each would stand to profit by tapping into the liquidity and userbase of the opposite.