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Home»ADOPTION NEWS»Paradigm leads $7.5M seed round for Sorella Labs, which aims to solve Ethereum’s MEV problem
ADOPTION NEWS

Paradigm leads $7.5M seed round for Sorella Labs, which aims to solve Ethereum’s MEV problem

By Crypto FlexsAugust 20, 20244 Mins Read
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Paradigm leads .5M seed round for Sorella Labs, which aims to solve Ethereum’s MEV problem
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Sorella Labs is a startup building tools to solve cryptocurrency problems. Ethereum Ethereum

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The Maximum Extractable Value (MEV) issuance raised $7.5 million in a seed funding round.

Paradigm led the round, with participation from Uniswap Ventures, Bankless Ventures, Robot Ventures, and Nascent, Sorella Labs said Tuesday. The company closed its seed round in September of last year, but co-founder and CEO Ludwig Thouvenin told The Block that the announcement came today as the company emerged from stealth with one of its MEV tools currently active. He declined to comment on the structure of the seed round, its valuation, or whether any of the investors had board seats at Sorella as advisors or directors.

Thouvenin co-founded Sorella Labs in 2022 with Karthik Srinivasan. Both are college dropouts. The two met at the University of Chicago that year and quickly developed an interest in blockchain technology. Thouvenin said he saw the potential for innovation in the cryptocurrency space and decided to leave college and start Sorella.

What are Sorella Labs?

Sorella Labs is developing tools to solve Ethereum’s maximum extractable value problem. MEVs are profit validators, or bots, that can extract value by reordering, inserting, or censoring transactions within a block. Common MEV strategies include front-running (executing transactions before others), sandwiching attacks (trading before or after large transactions), and arbitrage (profiting from price differences between platforms). These practices can result in higher costs for DeFi users and can provide an unfair advantage to users with more resources.

“We knew MEV was very prevalent on Ethereum, but it was crazy to see how much,” Thouvenin said. “It’s very rare to find a block without MEV.”

Thouvenin said that according to Sorella’s internal analysis, more than $855 million has been lost to MEV actors since Ethereum’s Merge upgrade in September 2022. He added that this figure is a lower-bound estimate.

To prevent this MEV loss, Sorella Labs is developing two tools, Brontes and Angstrom, the former of which is being released today.

Brontes is an open-source blockchain analytics tool that processes Ethereum blocks, classifies transaction activity, and identifies MEVs through pattern matching and analysis, Thouvenin said. He described it as “an open-source Etherscan with custom block analytics.”

Angstrom, on the other hand, will launch with a Uniswap V4 hook, Srinivasan told The Block. It will use Sorella’s off-chain network to run two auctions per block. The first auction determines who will trade first, and the second is a batch auction where all orders are executed at the same price, preventing arbitrage, a common form of decentralized exchanges, Srinivasan said.

Angstrom is expected to be launched later this year when Uniswap V4 goes live on mainnet. Sorella plans to deploy Angstrom V1 on mainnet first, then expand V2 to many Layer 2s deployed on Ethereum, Srinivasan said.

Sorella vs. Flashbot

Flashbots, another Paradigm-backed crypto company, is also focused on solving Ethereum’s MEV problem. Flashbots raised $60 million in a Series B round last year, valuing the company at at least $1 billion.

When asked about the differences between Sorella and Flashbots, Thouvenin responded that Flashbots targets MEV infrastructure at the Ethereum protocol level, while Sorella focuses on mitigating MEV at the application layer.

“The most blatant MEV extraction currently takes place on decentralized exchanges, where liquidity providers lose money due to sophisticated arbitrage, and users face suboptimal execution quality due to sandwich attacks,” Thouvenin said. “This not only undermines trust in decentralized systems, but also hinders the growth and efficiency of the Ethereum ecosystem.”

Thouvenin said Sorella is working “very closely” with Flashbots because the two companies’ MEV mitigation approaches are complementary.

Sorella Labs, located in Manhattan, currently employs about 15 people, and Thouvenin plans to expand the team by hiring MEV researchers, Rust developers, and systems engineers.


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Disclaimer: The Block is an independent media outlet providing news, research and data. As of November 2023, Foresight Ventures is the largest investor in The Block. Foresight Ventures invests in other companies in the cryptocurrency space. Cryptocurrency exchange Bitget is an anchor LP of Foresight Ventures. The Block continues to operate independently to provide objective, influential and timely information on the cryptocurrency industry. Current financial disclosures are as follows:

© 2024 The Block. All rights reserved. This article is provided for informational purposes only. It is not provided or intended to be legal, tax, investment, financial or other advice.

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