Seed round valuation of 100 million USD, can Vertex compete with dydx?

Author: DeMan

In the realm of decentralized exchanges (DEX) for derivatives, the competitive landscape is extremely complex. Market leaders such as GMX, dYdX, and SNX firmly occupy the top positions, while second-tier platforms like Gains Network, MUX, Level, and ApolloX are also actively vying for market share. Meanwhile, a steady stream of new protocols continues to emerge, making this field increasingly vibrant.

Against this backdrop, Vertex Protocol stands out, with its trading volume, total value locked (TVL), and revenue growth reaching historic highs. Notably, in November of last year, Vertex's performance was remarkable: on November 6, its single-day trading volume exceeded $400 million, and during the week from November 2 to November 7, Vertex became the second-highest trading volume platform for on-chain perpetual contracts, only behind dYdX. This rapid growth is closely related to Vertex's unique features, incentive programs, and the upcoming liquidity bootstrapping auction (LBA).

Even more strikingly, on November 28 of last year, Vertex achieved a historic breakthrough in the derivatives trading platform, with a single-day trading volume reaching $1.63 billion.

This achievement not only allowed Vertex to surpass established trading platforms like dYdX and GMX but also firmly secured its position as the leader in the derivatives DEX market. This significant accomplishment not only demonstrates Vertex's strength but also foreshadows its future leadership in the DeFi derivatives market. The following text will introduce the details.

Migration from Terra to Arbitrum Expands Its Application Scope, Seed Round Valuation Exceeds $100 Million

The development journey of Vertex Protocol showcases a company's adaptation and transformation amid industry turmoil. Initially, Vertex operated as a decentralized foreign exchange platform on the Terra chain, but the collapse of Terra in May 2022 forced Vertex to seek new development paths. Making a strategic decision, Vertex migrated to the Arbitrum chain and transformed into a decentralized exchange (DEX). During this transformation, Vertex not only migrated the platform but also significantly expanded its business scope, introducing new products such as spot trading, futures trading, and lending markets to meet the increasingly complex and diverse demands of the DeFi market.

Vertex's transformation and development benefited from the professional skills and market insights of its founding team. Co-founder Darius is responsible for promotion and marketing, while Alwin Peng, with his experience at Jump Trading and background as a blockchain engineer, supports Vertex's technical development. Their collaboration and expertise have played a key role in Vertex's steady growth in the new environment.

In June 2023, Vertex received a strategic investment from Wintermute Ventures, marking an important milestone in its development journey. Wintermute Ventures is the investment arm of cryptocurrency market maker Wintermute, which provides market-making services for several well-known projects. When investing in Vertex, Wintermute noted that Vertex has a team of experienced traders and engineers with a strong track record in both traditional finance and decentralized finance markets, and is at the forefront of smart contract and market innovation.

In April 2022, Vertex completed a $8.5 million seed round financing, led by Hack VC and Dexterity Capital, with several other institutions participating. This financing demonstrated the market's interest in Vertex and recognition of its future development potential.

Early investors received an 8.5% token allocation, bringing Vertex's seed round valuation to $100 million, a figure that reflects the market's assessment and expectations for Vertex to some extent. Although such valuation and investment have brought a certain level of market attention and expectation, Vertex, as an emerging enterprise in the rapidly changing DeFi field, still has its future performance and market position to be tested over time.

Deepening Decentralized Derivatives, Pursuing Ultimate Cost-Effectiveness: An Overview of Vertex's Advantages and Innovative Capabilities

Vertex Protocol has demonstrated significant innovative capabilities in the DeFi field, with its features and service model particularly prominent in data-driven decision-making. The specific advantages include:

1. Deep focus on decentralized derivatives: Vertex primarily operates in the contract market, especially in perpetual contract trading, which is quite distinctive among many DeFi platforms; the spot and lending markets provide more support for contract trading, as reflected in trading data, where most transactions are concentrated on perpetual contracts.
2. Hybrid Order Book-AMM Model: Vertex combines off-chain order books with on-chain AMM to improve trading speed and reduce the likelihood of MEV attacks; through data analysis, Vertex optimizes trading paths to ensure that trades remain effective even when order book liquidity is insufficient.
3. Universal Cross Margin: Vertex's Universal Cross Margin model expands the application scope of margin; compared to traditional isolated and cross-margin models, this model allows all of a user's funds (including LP funds) to be used as margin, greatly improving capital efficiency.
4. More attractive trading fee structure: Vertex's trading fee structure is more favorable to users, with maker fees at zero and taker fees ranging from 0.01% to 0.04%; according to trading data, this fee structure has attracted a large number of users, especially high-frequency traders.
5. More favorable funding rates compared to competitors: In terms of fees and capital efficiency, Vertex has a clear advantage over other mainstream derivatives DEXs. Compared to GMX (0.1% opening and closing fees), dYdX (0.02% to 0.05% trading fees, decreasing with trading volume), and Kwenta (0.02% to 0.06% trading fees), Vertex's low fee structure has given it a competitive edge in the market.
   In summary, Vertex Protocol has established its unique positioning in the DeFi market through its data-driven trading products, innovative liquidity supply models, strategies for improving capital efficiency, and competitive fee structures. These characteristics reflect Vertex's sensitivity to market trends and its deep understanding of user needs.

Although Vertex faces fierce market competition and a constantly changing technological environment, its data and market performance so far indicate its potential and development space in the DeFi field. Over time, how Vertex leverages these advantages to consolidate and expand its market position will be key to its long-term success.

Analyzing the VRTX Token Economic Model: 90.85% of VRTX Will Be Distributed Over More Than 5 Years

Vertex Protocol officially issued its native token VRTX on November 20, 2023, injecting new momentum into its development in the DeFi derivatives market.

The total supply of VRTX is set at 1 billion tokens, and its distribution strategy reflects considerations for different stakeholders:

1. Continuous incentives: 34% of the tokens are allocated for continuous incentives to encourage user participation and contribution.
2. Founding team: 20% is allocated to the founding team to support their long-term commitment and development.
3. Initial Token Phase: 10% is allocated for the first phase of the "Trade & Earn" program.
4. Treasury: 11.7% belongs to the project's treasury.
5. Ecosystem: 9% is allocated for ecosystem development and expansion.
6. Early investors: 8.8% is allocated to early investors, expected to be distributed within 2 to 3 years after the project launch.
7. Future contributors: 5% is reserved for individuals or teams that contribute to the project in the future.
8. Liquidity Bootstrapping Auction (LBA): 1% is allocated for liquidity bootstrapping.
9. Advisors: 0.5% is allocated for the advisory team.

The VRTX token distribution strategy demonstrates Vertex's long-term planning and market expansion goals. According to official documents, 90.85% of VRTX will be distributed over more than 5 years, and this gradual token release plan aims to ensure the project's stability and sustainable development. Currently, only 16% of the total token supply has been distributed, with only 10% in actual circulation.

The primary purpose of the VRTX token is to promote community engagement and collaborative development within the Vertex ecosystem. Its main functions include staking and incentives. Users can contribute to the security of the Vertex ecosystem by staking VRTX. Vertex has introduced a "VE" model, generating voVRTX scores based on the length of staking, incentivizing users to hold and participate long-term; rewards are provided to contributors at different levels to encourage ongoing participation and support.

Advantages and Disadvantages Are Both Obvious, Vertex's Future Is Uncertain but Long-Term Trends Are Worth Monitoring

Despite the fierce competition in the DeFi derivatives market, "liquidity mining" as a cold-start method still shows practicality. However, for Vertex, how to maintain momentum and cultivate a loyal user base after the rewards end remains an unknown. Currently, over 97% of derivatives trading volume still occurs on centralized exchanges (CEX), with derivatives DEXs accounting for only 2.72% of total trading volume. Once derivatives DEXs achieve breakthroughs, it could lead to significant market changes. This has led many investors to be optimistic about the derivatives DEX space, believing they may play a core role in the next bull market.

From a market perspective, the issuance of the VRTX token by Vertex Protocol and its potential market influence showcase the ambition of a company seeking innovation and breakthroughs in the DeFi field. Although derivatives DEXs currently hold a small share of the overall cryptocurrency market, with technological advancements and increased user awareness, the DeFi derivatives market has the potential for significant growth. Vertex is attempting to carve out a place in this rapidly evolving market through its token economic model and ecosystem development.

Ultimately, whether Vertex can successfully maintain its market momentum and sustain its influence in the DeFi derivatives market in the long term will depend on its ability to continuously attract and meet user needs, as well as how it adapts to future market changes and challenges. As the DeFi space continues to evolve, the future performance of Vertex and its VRTX token remains worthy of attention and anticipation from the market and investors.