- Led by Paradigm, Sorella Labs has raised $7.5 million in a seed fundraising round.
- According to co-founder and CEO Ludwig Thouvenin, the company is developing solutions to address Ethereum’s MEV issue at the application layer.
In a seed fundraising round, Sorella Labs, a cryptocurrency firm creating tools to address Ethereum’s maximal extractable value (MEV) problem, raised $7.5 million.
According to Sorella Labs on Tuesday, Paradigm led the investment and included participation from Uniswap Ventures, Bankless Ventures, Robot Ventures, and Nascent. CEO and co-founder Ludwig Thouvenin said that although the company closed its seed financing in September of last year, it is only now making the announcement as it comes out of stealth and launches one of its MEV tools. Regarding the seed round’s composition, valuation, and whether any investors have assumed advisory or directorial roles on the Sorella board, he declined to answer.
The two university dropouts, Thouvenin and Karthik Srinivasan, co-founded Sorella Labs in 2022. When they first met that year at the University of Chicago, the two were even more interested in blockchain technology. They chose to quit the university and launch Sorella after seeing there was room for innovation in the cryptocurrency field, according to Thouvenin.
Describe Sorella Labs
To address the problem of Ethereum’s maximum extractable value, Sorella Labs is creating tools. Profit validators or bots that can extract by moving, adding, or censoring transactions within a block are referred to as MEVs. Front-running (executing trades ahead of others), sandwich attacks (trading both before and after significant transactions), and arbitrage (making money off of price disparities across platforms) are examples of common MEV techniques.
These tactics provide people with better resources an unfair edge and may increase prices for DeFi customers.
According to Thouvenin, “We knew that MEV was extremely pervasive on Ethereum, but it was crazy to see to what extent.” Unusually, a block will have at least one MEV.
Thouvenin stated that, based on Sorella’s internal study, since Ethereum’s Merge update in September 2022, over $855 million had been lost to MEV actors. He said that this number is a lower-bound estimate.
Sorella Labs is developing two tools, Brontes and Angstrom, to help prevent such MEV losses; the former is now available for use.
According to Thouvenin, Brontes is an open-source blockchain analytics tool that matches and analyzes patterns in Ethereum blocks to process them, categorize transaction actions, and find MEV. He defined it as an open-source Etherscan with the ability to do bespoke block analyses.
However, Angstrom will debut as a Uniswap V4 hook, according to Srinivasan. It will conduct two auctions every block using the off-chain network of Sorella. According to Srinivasan, frequent forms of arbitrage in decentralized exchanges are prevented by having a first auction that determines who transacts first and a second auction that is a batch auction where all orders are fulfilled at the same price.
After Uniswap V4 goes live on the mainnet later this year, Angstrom is anticipated to launch. After launching Angstrom V1 on the mainnet, Sorella intends to expand V2 to numerous Layer 2s running on Ethereum. stated Srinivasan.
Switch vs. Sorella
Another cryptocurrency company supported by Paradigm, Flashbots, is likewise committed to solving Ethereum’s MEV issue. In its Series B round last year, Flashbots raised $60 million and were valued at least $1 billion.
Thouvenin responded, “Flashbots targets MEV infrastructure at the Ethereum protocol level, whereas Sorella focuses on mitigating MEV at the application layer,” when asked how Sorella differs from Flashbots.
According to Thouvenin, the most obvious MEV extraction is presently occurring at decentralized exchanges, where users are subjected to subpar execution quality because of sandwich attacks, while liquidity providers are losing money as a result of smart arbitrage. This impairs the growth and effectiveness of the Ethereum ecosystem in addition to eroding confidence in decentralized technologies.
According to Thouvenin, Sorella and Flashbots collaborate closely since their methods for MEV reduction are complementary.
Currently, Sorella Labs, located in Manhattan, employs about fifteen individuals. Thouvenin intends to add systems engineers, MEV researchers, and Rust developers to the team.
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