Building the next generation of safe derivatives
Raised to Date: Raised: $0
Rolling Commitments ($USD)
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MARKET Protocol has been selected as a “Deal To Watch” by KingsCrowd. This distinction is reserved for deals selected into the top 10% of our deal diligence funnel. If you have questions regarding our deal diligence and selection methodology, please reach out to email@example.com.
Global interest in investing in and trading cryptocurrencies is undeniable. “Coinbase also reports that 70,000 to 100,000 new crypto trading accounts are being opened every day on their platform.” These assets are made possible with the use of blockchain technology, an attractive alternative to more centralized asset management.
This is not to say there are no problems with the crypto market. Specifically, most crypto exchanges simply don’t provide enough liquidity. “High transaction fees, poor security and non-availability of fiat gateways to on-ramp new customers – hamper seamless trading in cryptocurrencies” which can turn away potential traders.”
The opportunities for trading derivatives and futures specifically are limited. MARKET Protocol aims to become the “next big derivatives exchange” in an attempt to tackle these problems.
MARKET Protocol has established a platform for creating safer digital assets (derivatives). Specifically, MARKET Protocol has created ‘legos’ that make up derivatives. Through the platform, users can take these legos and design tokens to represent their assets. For example, Apple shares, or bitcoin.
MARKET Protocol offers three products- the latter mentioned MARKET Protocol, MARKET Protocol Exchange, and the Minting Platform. The first incorporates the ‘legos,’ where a user can build derivatives via an open-source, blockchain-backed framework. The MARKET Protocol Exchange is a simpler trading interface through which token offerings can be viewed, as well as trader feedback. The Minting Platform is where the ‘legos’ “are combined to create products with a straightforward interface.”
Since its launch in July of 2019, MARKET Protocol has over 650 registered users and over $450000 in minted tokens.
CEO and Co-Founder, Seth Rubin, has experience as a derivatives trader and previously founded BRE Trading, an algorithmic trading group. He holds a degree in Economics from the University of Rochester.
COO and Co-Founder, Collins Brown, previously traded U.S. government bonds, U.S. Treasury futures, Eurodollars, and international interest rates at Transmarket Group. He later worked alongside Rubin the co-found BRE Trading. He holds a degree in Finance and Economics from Miami University.
In order to mint tokens, users deposit collateral and pay a 0.50% minting fee based on the amount of the collateral. Rubin reports that they will also collect trading fees from transactions on the exchange, but the majority of revenue will come from the minting of these tokens.
To date, MARKET Protocol has $0 in revenue and cost of goods sold. Internal revenue projections suggest $100M by 2023, though the company is not currently profitable.
Why We Like it
- Market Landscape: Billions of dollars are traded in the crypto space on a daily basis. In fact, 5% of total trading volume is comprised of top-rated crypto exchanges. And worldwide spending on blockchain is rapidly increasing. This space is undoubtedly trending. The team at MARKET Protocol has identified a clear pain point in a large and growing market. By tokenizing both new and traditional assets, not only is MARKET Protocol tapping into the large crypto space, but also trading on tradition exchanges (stocks, bonds, etc.)
- Competitive Differentiators: Though the large market is indicative of a crowded space, MARKET Protocol stands out with several key differentiators. Specifically, MARKET Protocol is both decentralized and covers a range of assets. CME Group, for example offers a marketplace for a diverse set of derivatives, but remains relatively centralized. BitMEX, another exchange, is narrowly focused on Bitcoin products.
- Impressive Team: The collective industry experience of the MARKET Protocol team is undeniable. Not only do the founders have industry expertise, they have previously co-founded a trading group.
- Venture Backing: MARKET Protocol already has backing from two firms: Zero G Capital and Wyre Capital, grounding trust in any investment.
The Rating: Deal To Watch
MARKET Protocol is a Deal To Watch. The team is going to have to raise significant revenue to win out in the space, however this is a large addressable market with a clear pain point. The team’s significant experience in the industry mitigates some of the risk of investment.
Though the company is not cash flow positive at this time, the product is highly scalable and nearing profitability. Having not one, but two venture firms backing the product alleviates concerns regarding the lack of revenue.
The product is still in its infancy which could pose a risk, however the team has a clear roadmap for future iterations and some solid early traction. Finally, the product is significantly differentiated from both other startups and large incumbents, making an investment at the ground floor potentially quite rewarding.
Additionally, the crypto market is ripe with acquisitions. Blockchain startup Coinsquare acquired StellarX, a decentralized exchange app in February of 2019. Facebook acqui-hired Chainspace, another decentralized infrastructure, in 2019. As seen below, the trading and investing sector led in number of M&A deals this year, making an acquisition a likely exit opportunity for the MARKET Protocol.
Since it is still early, and there are some risks associated with investment alongside the strong team and competitive differentiation, MARKET Protocol is a Deal To Watch.