February 21, 2022
This blog was written by Mike Yoder who recently joined Paradigm as a Principal Engineer on our Infrastructure team. He had no experience with the language of finance, and so he attempted to re-create our messaging in a way that the average software engineer could understand.
Paradigm’s founders, and much of the leadership, come from a trading background and our customers are traders and finance types. The web site uses words that make perfect sense to people with these backgrounds, but to the average software engineer the web site is puzzling - the words are English, but when arranged in that order...
I’m a software engineer with no cryptocurrency or finance background, and most of the public literature on the company was opaque to me. Had I not known Alex Potashnik, our excellent VP of Engineering, I would not have had much reason to consider joining Paradigm. But I did, I got lucky, here I am, and I would like to take this blog post to try and explain the product and the business opportunity to someone like me - a newbie to both finance and crypto.
Let’s start at the top of paradigm.co. We see
“Institutional Liquidity Network for Derivative Traders. Get the best price on large size and complex, multi-leg structures, settled at the venue of your choice.”
There’s a lot to unpack there.
- Institutional. Our customers are crypto trading whales. Think lenders, proprietary traders, family offices, hedge funds, and high-net-worth individuals.
- Liquidity Network. From Investopedia, liquidity is “the efficiency or ease with which an asset or security can be converted into ready cash without affecting its market price.” In other words, if you want to sell something, can you easily find a buyer for it? Our platform has many buyers and sellers and so we provide a lot of liquidity in what is usually a rather illiquid market.
- For Derivative Traders. From Investopedia, a derivative is "a type of financial contract whose value is dependent on an underlying asset, group of assets, or benchmark". In our case, the underlying assets are cryptocurrencies. Popular derivatives include options and futures.
- Get the best price on large size. As said above, our customers are whales.
- Complex, multi-leg structures. Options and futures can be combined together (into “structures”) to do all sorts of interesting things, like profit when the price goes down, profit when the price stays the same, profit when the price changes a lot, etc. To make this wizardry happen, the basic units of options (”calls” and “puts”) are combined together into multiple “legs” in one atomic transaction.
- Settled at the venue of your choice. We don’t actually handle funds. Buyers and sellers get together on our platform and agree on a price. That agreement is automatically taken to an exchange like Deribit and handled there.
So there you go: We provide a marketplace for large crypto traders to trade big and complicated cryptocurrency derivatives. Because we are by far the biggest marketplace in this space, there are many buyers and sellers (liquidity) and everyone can usually get a better price with us than elsewhere.
Like any marketplace, network effects are important - the more people use the network, the more valuable it becomes. Paradigm dominates this space. Today there is no viable #2 marketplace doing what we do.
The entire space is growing with incredible speed. Many of the building blocks of finance on blockchains are coming online right now. There are many opportunities to integrate with others in this space, offer new products, and grow at the speed of cryptocurrencies. It feels like 1998 on the internet. We’re in early times in an exploding space and are the leader in a market with strong network effects.
The business case for what we’re building is amazing. The software engineering side is interesting too. We get to learn esoteric finance and DeFi. Since we’re a young company we don’t have excess historical baggage; we get to follow the latest best practices in engineering and use shiny new toys like kubernetes, golang, django, good process integrations with github, jenkins, AWS, etc. We’re a small team that’s growing fast and hiring good people.
If this sounds interesting to you, check out our careers page. We’re hiring!