Jan 30, 2024 - Business

Coinbase backs $34 million round for decentralized Bitcoin exchange

Illustration of light streaming out of an open safe.

Illustration: Lindsey Bailey/Axios

Portal has raised a new $34 million funding round to build a decentralized exchange for trading bitcoins with assets on other blockchains.

Why it matters: Centralized exchanges, like FTX and Binance, have been a liability for an industry created to undermine financial intermediaries. The better the DeFi variety gets, the less their centralized cousins will be needed.

Context: A decentralized exchange, known as a DEX, operates on code alone, autonomously, without the need of a human intermediary.

  • If everyone who built such an exchange were to quit and walk away, it would continue to operate. In this way it's no more a third-party than a road or flightpath.

The issue, however, is that blockchains have a hard time dealing with data that lives on other blockchains. And cryptoassets — which are just data — exist on a number of different ones.

  • Trading between blockchains is both tricky and risky. The best known DEXs, such as Uniswap or Pangolin, operate on one blockchain, allowing users to trade tokens that run on that chain.

Zoom out: Portal — whose backers include Coinbase Ventures, Arrington Capital, OKX Ventures and Gate.io — aims to improve the experience of making trades between assets regardless of where they run.

What they're saying: "Bridges, centralized exchanges and other custodial solutions that enable cross-chain exchange have been vulnerable and insecure for as long as they have existed," Portal CEO Chandra Duggirala said in a statement.

Reality check: It's a crowded field. Thorchain, Stargate, Wormhole and others are all taking on the use case.

  • Yes, but: No project has truly nailed it yet. Solutions to bridge assets across chains have been hit with hundreds of millions of dollars worth of losses from code exploits.

Between the lines: To secure its transactions between chains, Portal touts its use of so-called atomic swaps — a cryptographic method that uses a predetermined code to allow two people to make a trade.

What we're watching: The fact that Portal is leading with functionality for the Bitcoin blockchain. The oldest cryptocurrency has mostly been an afterthought for most of these projects.

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