Order Book + AMM, what is the hybrid exchange developed by Kuru?

By ChandlerZ, Foresight News

The structural bottleneck of on-chain trading experience is gradually emerging. Although the AMM model has promoted the development of early decentralized exchanges, its limitations in liquidity utilization efficiency, price discovery mechanism and limit order support have always left a gap between on-chain trading and centralized exchanges. On the other hand, although the CLOB model has higher flexibility and accuracy, it has long been limited by the performance of the public chain and the cost of on-chain execution, making it difficult to truly land.

On July 7, Kuru Labs, a decentralized exchange on Monad Layer 1, announced the completion of a US$11.5 million Series A financing round, led by Paradigm, with participation from angel investors including 0xDesigner, Viktor Bunin, Zagabond, Tristan Yver, Kevin Pang, Will Price, Alex Watts, Jordan Hagan, 3nes, Shreyas Hariharan, Auri and Joe Takayama.

Kuru Labs is committed to building a full-chain trading platform that combines order book architecture and automatic market making logic on the high-performance Layer 1 blockchain Monad. The project hopes to provide a more balanced product path for both professional traders and ordinary users through the reconstruction of the underlying architecture.

Project Background

Kuru Labs is a startup project focused on building an on-chain order book trading platform. It was founded in 2024 by a team with experience in high-frequency trading, DeFi protocol development, and on-chain system optimization. The project goal is to create a decentralized trading platform that is completely based on blockchain and has both order book and automatic market making functions. Kuru's idea is not to take shortcuts from the existing architecture, but to start from the bottom, combining the advantages of the two existing mainstream models, and reproducing a spot trading system on the chain that is closer to the experience of centralized exchanges.

In terms of financing, Kuru completed a seed round of financing in mid-2024, raising $2 million in funding, led by Electric Capital, with participation from Brevan Howard Digital, CMS Holdings, Pivot Global, Breed and Velocity Capital, as well as angel investors such as Keone Hon, Jarry Xiao and Eugene Chen. This round of financing was mainly used to build a technical team, build a minimum viable product (MVP) and prepare for the testing phase.

Kuru announced the completion of its Series A financing with a total of US$11.5 million, led by Paradigm. Kuru co-founder Vaibhav Prakash said that Paradigm has played an active role in the construction of the microstructure of the on-chain market. The team plans to use the Series A funds to further expand the resources needed for the team and realize the vision of a fully on-chain order book on the Monad mainnet.

Technical architecture and product design

Kuru does not follow the AMM model currently used by mainstream decentralized exchanges, but instead attempts to build a hybrid system that combines order books with automated market making functions. The core idea is to introduce a default automated market making algorithm into the order book of each trading pair on the chain, so that users can still obtain basic quote support when there is a lack of active liquidity providers. Compared with traditional order books, this design does not rely on centralized market makers to maintain market liquidity, nor does it rely on AMM's unified constraints on price curves. Instead, it provides a possibility to flexibly switch between the two.

In terms of operation, Kuru has designed an order management mechanism suitable for the on-chain environment. The submission and cancellation of limit orders use low and predictable gas costs, allowing market makers or strategic traders to perform frequent operations without limiting their efficiency due to high costs. The team is also developing a passive liquidity mechanism that allows ordinary users to use assets for liquidity support through strategy contracts without having to manage pending orders. This approach hopes to lower the threshold for participation while increasing the funding coverage of the on-chain order book.

Technically, Kuru chose Monad blockchain as the deployment platform. Monad is a Layer 1 blockchain compatible with Ethereum EVM. It is still in the testing phase. In June, the second phase of the test network verification nodes were put into operation, including 161 verification nodes from 64 cities in 33 countries.

Monad Labs was co-founded by several former Jump Trading developers. In April 2024, the company completed a $225 million round of financing, also led by Paradigm, with participation from Electric Capital, Coinbase Ventures, Castle Island Ventures, GSR Ventures, and Greenoaks. Monad Labs previously received $9 million in pre-seed funding in May 2022 and $10 million in seed funding in December 2022, and then raised $19 million in funding led by Dragonfly Capital.

Unlike the existing EVM public chain, Monad does not simply copy the Ethereum code, but reconstructs the execution engine from the bottom up, adopts a parallel architecture and pipeline scheduling mechanism to improve the processing capacity per second and reduce block latency. Internal test data shows that Monad can achieve a processing capacity of 10,000 TPS in a controlled environment and maintain a block speed of one second. Kuru relies on this kind of basic performance to build a fully on-chain and scalable matching system. Because Monad supports EVM bytecode, Kuru is also compatible with development tools and user-end products in the Ethereum ecosystem, reducing migration costs.

Although the technical architecture is cutting-edge, Kuru also faces practical limitations. The Monad mainnet has not yet been launched, and its chain-level performance and network stability have not yet been verified in a public environment. Kuru's product design is highly dependent on the real-time and predictability of on-chain transactions. If Monad cannot be delivered on schedule, it will directly affect the platform's launch rhythm and the feasibility of core functions.

Ecological prospects and uncertainties

The hybrid order book model built by Kuru is in the early stages of market verification. This model attempts to provide a new on-chain choice between existing AMMs and centralized order books, making market making behavior closer to traditional trading systems while retaining the openness and composability of decentralized protocols. Ideally, this architecture will not only cover mainstream trading pairs, but also serve long-tail assets, thereby providing a unified trading infrastructure for various asset types.

The team remains relatively optimistic about market opportunities. On the one hand, the trading logic of the on-chain order book is more in line with the strategic habits of professional market makers and institutional investors; on the other hand, with the support of high-performance infrastructure such as Monad, the execution efficiency may be significantly improved, making it possible for models that could only run on centralized exchanges to run on the chain for the first time. In addition, due to Monad's compatibility with the Ethereum developer ecosystem, Kuru can relatively smoothly attract existing developers to integrate their trading components with the protocol, leaving more room for product expansion.

However, there are still a series of uncertainties at this stage. The first is the risk of technology realization. Although the design goals of Monad are attractive, there is still a gap between the white paper and the actual operating environment. Multiple dimensions such as on-chain throughput, transaction confirmation, and node synchronization may become restrictions. The second is the actual motivation for user migration. At present, most on-chain trading users have formed the habit of using AMM platforms, and it is not easy to convince them to switch to the order book model. Although Kuru supports the simplified liquidity participation method in terms of mechanism, the actual effect still needs time to observe.