January 24, 2022

Announcing Our Investment Into C3 – Arrington XRP Capital

We are excited to announce our investment into C3 Protocol, what we believe to be one of the most exciting projects emerging out of the Algorand ecosystem. We led the round alongside Jump Capital, with other excellent investors participating across ParaFi, Mechanism, GoldenTree, Cumberland, DCG, Blockchain.com, Node and Borderless Capital.

The team behind C3 have proven themselves a powerhouse for development on Algorand. At Rand Labs, they built a 40+ person team with unique Algorand-based expertise, ultimately producing some of the most widely used products in the ecosystem: MyAlgo and the AlgoExplorer and API. 

The team has been developing on Algorand since 2018, thick and thin, and they are now rolling up their sleeves to build a powerful new primitive. 

C3’s vision is to build a layer for cross-margined and cross-chain trading in DeFi. Liquidity today is fractured across many venues, protocols and blockchains. Instead, users should be able to trade from a single global account plugged into other blockchains, managing their positions and collateral from a single hub.

Fragmented trading is capital inefficient and carries unnecessary risk. A position on protocol X is completely siloed from a position on protocol Y: it cannot be used to collateralize new positions. PnL is localized, siloed protocol-by-protocol. C3 wants to instead make PnL global, covering all positions across blockchains and protocols.

Cross-margining was one of the powerful drivers behind FTX’s sudden rise to dominance, and it is simply a given in TradFi. C3 will achieve DeFi cross-margining by rebuilding the entire trading stack on a single layer. This hub for capital markets will plug into other ecosystems using novel interoperability technology unique to Algorand. This technology will enable decentralized and trustless bridges.

If a given bridge is decentralized and the L1 attesting to transactions is also decentralized (Algorand), then C3’s application layer could spawn a cross-chain ecosystem of decentralized trading. Just as C3 aspires to unite the trading experience fractured across different chains, Algorand has a strong vision for interoperability. While we see the project as a bet on the cross-margining problem in DeFi, C3 is also a strong play on the multi-chain landscape, exporting the benefits of Algorand’s L1 to the rest of crypto. If the application takes off, C3 could propel Algorand as the “chain of chains”.

Blockchains could be converging on a hybrid approach between L1 and L2 scalability — from the rise of Lightning on Bitcoin to rollups and sidechains on Ethereum. In this vein, C3 is taking a hybrid approach to protocol design. The orderbook will host trading on an off-chain L2, leveraging CeFi-type performance, but transactions will ultimately settle on the Algorand main chain at each block. C3 leverages the decentralization and security guarantees of Algorand’s L1, with 4 second settlement times allowing for a quick migration between L2 to L1.

C3 is a very ambitious idea: one single global account and PnL universe for DeFi. It ultimately captures our thesis that Algorand will bridge DeFi and TradFi in the long term. In this case, the C3 team is taking the best of CeFi and TradFi trading experiences and bringing these learnings to a fractured and capital inefficient DeFi.

We are excited to back the C3 team on this journey and look forward to their major technical milestones and launch in 2022. 

Medium: https://medium.com/c3protocol/announcing-c3-protocol-5c5e998d4c73

Coindesk: https://www.coindesk.com/business/2021/11/22/algorand-project-raises-36m-to-make-cross-chain-defi-friendly-for-big-investors/

Yahoo Finance: https://au.finance.yahoo.com/news/c3-protocol-raises-3-6m-183600390.html

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