Automated market maker MonoX has today announced a debut capital raise of $5 million from venture firms including the likes of Axia8 Ventures, Animoca Brands, Divergence Ventures, among others.

MonoX will use the funds to support its ambitions in reducing the capital and liquidity prerequisites for decentralized finance (DeFi) projects offering swap, lending, borrowing and derivative capabilities on decentralized exchanges (DEXes).

The protocol will achieve this through the introduction of a single-sided liquidity model. Though not a revolutionary concept for liquidity pools, it will aim to support the DeFi ecosystem’s growth.

In traditional DEXes such as Uniswap, industry projects require two tokens to build a “liquidity pair,” increasing the capital barrier for entry. With the single-sided liquidity model, projects are only required to provide their native token. As such, they can offer more liquidity to the market.

Founder and CEO of MonoX, Ruyi Ren, shared his views on the potential impact of the funding:

“With a lot of innovation in the DeFi space, over-collateralization has become an increasingly big problem. We will use the funding to grow the team, further develop and build our community in new flourishing DeFi ecosystems like Solana.”

Related: Derivatives exchange dTrade raises $22.8M for market makers

Once a DeFi project contributes its native token, the MonoX-backed stablecoin vCASH steps in as the second token to form the liquidity pair. Pegged 1:1 to the U.S. dollar, vCASH aims to reduce trading fees commonly experienced within the transactions of traditional automated market makers (AMM).

MonoX is set to launch its mainnet version on the Ethereum and Polygon blockchains in Q3 2021.

Despite the vast potential of single token liquidity, this is by no means the first application of this kind within in the DeFi space.

This time last year, fellow AMM Bancor launched what it called “liquidity mining 2.0” — a single token liquidity provision designed to overcome the insidious challenges of sustaining liquidity and volume in the DeFi markets.