Sparkswap Raises $3.5 Million From Initialized, Pantera for Lightning-Powered DEX

A San Francisco-based decentralized exchange called Sparkswap launched Monday, becoming the first North American exchange to fully integrate the lightning network, a bitcoin scaling solution.

Sparkswap is funded by a $3.5 million seed round led by Initialized Capital, with involvement from venture capital firms such as Pantera Capital and Foundation Capital.

Due to the experimental nature of the nascent lightning network, Sparkswap imposed a $2,500 daily trading limit for the first few months, with plans to raise the limit and add more trading pairs in the near future.

Brett Gibson, a partner at Initialized Capital, told CoinDesk that Sparkswap was the first startup he's seen that offers traders self-custody without sacrificing speed.

Fellow investor Paul Veradittakit from Pantera Capital added that Sparkswap caught his eye because it's one of the few DEX startups to focus, albeit not exclusively, on bitcoin rather than ethereum-based tokens.

Lightning Labs engineer Alex Bosworth, who works on the LND implementation that Sparkswap leverages, told CoinDesk it's not clear yet whether the technology will be consistently faster than fully centralized processes.

To complicate matters, there is also a cultural gap between the institutional traders Sparkswap seeks to serve and the capabilities lightning currently offers.

Speaking to how this applies to Sparkswap, technically Sparkswap wallets can be used to send payments to anyone using the lightning network, mirroring payment options offered by centralized exchanges like Zebpay.

"An application like Sparkswap could really push lightning toward higher transaction uses. Most of the uses of the lightning network today are microtransactions and this could help support bigger transactions."

According to bitcoinvisuals.com, the average lightning channel capacity is currently less than $200. In addition to boosting the lightning network's capacity for bitcoin, Griffith said Sparkswap plans to explore ways for the exchange to integrate support for stablecoins and ethereum-based assets as well.