Ostium Labs raises $3.5M co-led by General Catalyst and LocalGlobe
We’re thrilled to announce that Ostium Labs has raised $3.5M from General Catalyst and LocalGlobe, with participation from Susquehanna International Group (SIG), DeFi Alliance, Balaji Srinivasan, Shiliang Tang (LedgerPrime), and nearly 20 additional founders, investors, and advisors. This funding will facilitate the launch of our flagship protocol, the first decentralized, non-custodial perpetuals exchange for Real World Assets.
Market Paradigm Shift
Our launch comes at a critical time in financial markets. Unprecedented growth in the monetary base, supply chain bottlenecks, and rapid geopolitical change since 2020 drove inflation to 40-year highs. Central banks then surprised markets with a meteoric rise in interest rates, crushing tech, growth, and crypto markets and blowing out yields on government debt.
As a result, long-held relationships between asset classes have broken down. Traditional diversification strategies like the 60/40 stock and bond portfolio, for instance, suffered a 16% loss in 2022. Commodity and currency prices are increasingly unstable.
We are seeing a paradigm shift.
Accelerating Diversification
Unsurprisingly, investors are increasingly diversifying into alternative asset classes.
This is true both on- and off-chain. In traditional markets, consumer trading of institutionally-dominated commodities is through the roof, with 90% YoY volume growth in micro contracts for metals and crude oil last year. Niche alternatives like investable fine wines and fractional Private Equity are seeing traction as well.
On-chain, Real World Assets are growing rapidly and the term has become a catch-all for anything diversifying. Demand for tokenized treasuries and equities has soared five-fold and ten-fold respectively year-to-date. Both on- and off-chain traders are adapting their exposure to the changing macro environment.
Accelerating Real-World DeFi Adoption
The vast majority of these on-chain Real World Asset solutions are geared towards long-term holders, rather than traders. Yet if there’s one area of crypto with Product Market Fit, it’s trading. The growth in perpetual futures volume the last 18 months has been exponential.
The market lacks a dedicated platform for trading Real World Assets in a format already familiar to DeFi power users, catering to the increasing demand for on-chain exposure to diversifying bets on macro beyond crypto.
Enter Ostium
We’re building to bridge this gap, through the first decentralized perpetuals DEX purpose-engineered for Real World Assets, starting with commodities and FX.
For the first time, both the market demand and technical infrastructure exists to enable these financial primitives. At a high level, the V1 of our flagship protocol is:
- Stablecoin settled, for both LPs and traders
- Oracle based, using Chainlink’s newly announced low-latency Data Streams
- Margin enabled, with substantial leverage across asset classes
- Designed to minimize LP directional risk, aided by our risk management partnership with Chaos Labs:
* Hyperbolic funding rates * Skew-dependent opening fees * Capital efficient counterparty pool
- Unbiased and disintermediated: * Fully on-chain settlement and matching (no off-chain sequencer) * Outsourced triggering of automated orders using Chainlink Automations 2.0 (no in-house keeper system)
We’re thrilled to announce our public testnet rollout on Arbitrum this quarterand mainnet launch early next year, pending audits. Join us and sign up for our testnet here!
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Who We Are
Our founders met at Harvard in a freshman economics class before both working briefly at Bridgewater Associates. We first bonded over our shared experience competing in high-stakes environments, Marco as an International Physics and Math Olympiad medalist, and Kaledora in a previous career as a professional ballerina with the Royal Danish Ballet.
We began trading together across both DeFi and traditional markets in college. The more time we spent trading, the more we became frustrated with the cost, friction, and attention split needed to manage both on- and off-chain trades across asset classes. If blockchains are the future of financial infrastructure, why are traders using the blockchain for settlement limited to placing bets on crypto, rather than the full suite of assets they might want to trade? We envisioned Ostium to solve this problem and facilitate seamless on-chain diversification.
“Blockchain-based networks are seeking to transform the core infrastructure of the financial world through reduced transaction costs, improved settlement times, and composability. We believe that new financial primitives like Ostium will contribute to the much-needed upgrade of the system for all financial assets. Ostium is focused on enabling a greater set of assets, beyond crypto-native tokens, to be traded on-chain from FX to commodities. We are excited to share in the company’s values and partner.” — Nick van Eck, Partner, and Kyle Doherty, Managing Director at General Catalyst
“In the last century, we’ve seen vast growth in access to both financial and tangible assets. However, consumer access to and transparency in tangible assets still lags far behind, leading to reduced trading volumes and higher fees. We believe tangible, or “real-world” assets, are overdue for a technological upgrade. Blockchains are uniquely poised to facilitate this transition by enhancing transparency, facilitating fractionalization, and democratizing access. Ostium’s brilliant team and their ambition to become the leading on-chain platform for democratizing tangible asset investments resonates deeply with the foundational principles of web3. We’re thrilled about Ostium’s potential to cultivate access to a truly novel suite of on-chain assets and democratize consumer access to long underserved asset classes.” — Ash Arora, Partner at LocalGlobe
Our shared love of macro and first-hand experience of the underserved and antiquated commodities markets in particular has been a key driving force behind our protocol vision from day one.
Further Reading
We’re releasing more of our in-house research in the coming weeks, but sharing some of our longer-form threads below for additional reading.
