Zaki Manian's new DeFi project raises $3.5 million to help traders avoid big losses

Zaki Manian — best known in the crypto community as the lead developer behind the Cosmos blockchain — announced Wednesday the launch of his next endeavor: Sommelier. 

The new crypto network, which raised $3.5 million in a seed round, aims to improve the experience of trading on decentralized exchanges (DEXs). DEXs have seen impressive growth over the last year despite high fees, slow trade execution, and the prevalence of front-running.

To start, the project is focusing on enabling an order type that is common on Wall Street but which has yet to find its way to the decentralized finance (DeFi) world: a stop-loss order. In the brokerage world, such an order results in a buy or sell when a stock reaches a specific price. For instance, a trader might set a stop-loss to sell when security X trades 20% below the price at which they originally made the purchase — thus limiting losses. 

In DeFi, certain limitations of Ethereum's architecture prevent stop-loss functionality from existing, according to Standard Crypto's Alok Vasudev. To get around these limitations Sommelier has developed a so-called Layer 2 platform, which handles certain computations off-chain. It deploys smart contracts on Ethereum that monitor a trader's liquidity pool position and triggers the stop-loss if the asset price crosses a certain threshold. 

Standard Crypto led Sommelier's round. Multicoin and Alameda founder Sam Bankman-Fried participated. 

"For us as exciting as the project is — we're equally excited to back Zaki," Vasudev said. In February 2020, Manian stepped down from his role at Tendermint, where he had been leading the development of Cosmos. "He's a star and has been such a leader/force within crypto. he's well overdue to run his own show," said Vasudev.