Backing Mangrove – a unique DEX design without the need to lock liquidity

by Gleb Dudka, Feb. 28

We are excited to co-lead the $7.4M Series A of Mangrove DAO together with Cumberland. Other investors include CMT and Gumi Cryptos Capital. In this article, we share why we believe Mangrove’s unique approach to a decentralized exchange protocol and providing liquidity opens up a large design space for applications and protocols to build on top.

The challenge: siloed liquidity

One of the main limitations in DeFi is low capital efficiency and siloed liquidity. Given the programmable nature of DeFi, there is arguably no need for locking capital in one place.

However, currently this is – to a large extent – the case with $50B worth of liquidity locked in DeFi. It is also commonplace to lock capital across multiple unconnected liquidity pools.

As a result, the potential for earning yields is underutilized and composability is suffering, all of which in turn increases the cost of capital.

Mangrove’s unique approach: offers as code 

Mangrove solves these challenges by introducing the notion of “offers as code” (smart offers). Practically this means that liquidity/collateral does not have to be locked in a DEX itself but can be sourced from another pool or DeFi protocol once the order is hit. 

This new DEX design enables participants to post offers that are not fully provisioned. The Mangrove’s order book thus lists promises instead of locked commitments, which are nevertheless programmatically enforced.  The promised liquidity can be shared, borrowed, lent somewhere, and at the same time displayed on Mangrove, ready to be sourced when (and only when) an offer is taken.

The resulting consequences are far-reaching, because it removes liquidity fragmentation and the lock on assets, allowing its use in multiple places.

The recent collapse of FTX showed that while users appreciate the capital efficiency of an order-book exchange, trusting a centralized provider is not what crypto is about. By replicating the capital efficiency of a centralized exchange in a trustless and low-gas environment, Mangrove helps address fundamental problems in the market.

Mangrove was founded by a group of researchers in computational biology turned DeFi professionals during DeFi summer. They came up with Mangrove in 2021. The founders created the platform as a one-stop-shop where developers and DeFi protocols can build sophisticated trading strategies and integrate features including partial liquidations and carbon markets among others. Today, Mangrove’s programmable order book offers its users the possibility to use existing strategies to achieve higher returns or to develop their own strategies to obtain more flexibility.

Register now for alpha

Register for alpha and explore use-cases and strategies made possible with Mangrove and what it takes to build on top of the protocol.

Public mainnet launch is imminent.