Startup accelerator DeFi Alliance, which has notable mentors including Coinbase, has backed the first Solana-based project — Mercurial Finance.
DeFi Alliance has invested $100,000 in Mercurial and would help bootstrap liquidity of the protocol, Mercurial co-lead Ming Ng told The Block.
Founded earlier this year, Mercurial is building a protocol for stablecoin trading on the Solana blockchain. Mercurial can be seen as similar to Curve Finance on Ethereum.
But according to Ng, Mercurial's competitive edge is dynamic fees and dynamic allocation with low slippage. Slippage refers to the difference between the expected price of a trade and the price at which the trade is executed.
As for dynamic fees, Ng said Mercurial's trading fees would adjust according to market volatility. During high volatility, fees would increase to compensate liquidity providers and vice versa.
When asked about the choice of dynamic fees, Ng told The Block that in traditional market making, market makers charge more spread in volatile markets because there is more demand and risk, and lower spread in less volatile markets to attract more volume. "So we are looking to model those dynamic fees in our market-making vaults," said Ng.
For the dynamic allocation feature, Ng said Mercurial would look to dynamically allocate capital versus sitting in and not being used. "On Solana, we will be able to perform complex transactions, like lend all the capital out, and when needed, withdraw it back for the swap in the same transaction," explained Ng.
Mercurial's other backers include Alameda Research, Solana Ecosystem Fund, Huobi, OKEx, founders of CoinGecko, Blockfolio, Nansen, and others, said Ng. The project has raised a total of $10.3 million in funding to date via a Simple Agreement for Future Tokens (SAFT) sale, said Ng.
The Mercurial protocol is expected to launch next month, Ng told The Block, adding that details on what stablecoins will be supported will be announced later.
"In order for DeFi to thrive on Solana, deep stablecoin liquidity must be available," Imran Khan, lead at DeFi Alliance and general partner at Volt Capital, told The Block. "What Mercurial solves is the liquidity issue + opportunity cost by intelligently providing liquidity on pairs while yield farming + minting stablecoins."
Earlier this month, DeFi Alliance added Solana to its ecosystem partnership program, and Solana co-founder Anatoly Yakovenko is now one of the mentors at the organization.
Khan said the organization is currently working with over 20 projects and, to date, it has invested "millions" into blockchain projects, without providing a specific figure.
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