Investors Are All-In for DeFi


The world of decentralized finance (DeFi) is growing at an unprecedented rate at the moment, with a particularly notable increase in the investibility of protocols being an important marker.

Parallel Finance, a Polkadot-based DeFi protocol that offers lending and staking services, has just raised $22 million in a Series A funding round.

This capital raise has attracted some very interesting investors, which include Polychain Capital which led the round and includes Slow Ventures, Alameda Research and also Blockchain Capital, a firm which itself was invested in by Visa and PayPal.

$22 million in funding is somewhat remarkable for a company that was only launched five months ago in the spring of 2021, and is substantially higher than its initial $2 million raised in June this year.

The points of interest for investors that have perhaps led to this large scale investment are the staking and lending functionality of Parallel Finance, and in particular, leverage staking which allows users to borrow against their staking collateral to increase their yield, and liquidity mining allows users to stake their Polkadot (DOT) tokens to receive Parallel’s native tokens.

The popularity of staking is something that needs very little explanation, as CoinMetro provides staking opportunities for its users regularly, and in the XCM staking process, has allowed users to earn a passive income whilst creating CoinMetro’s own native utility token which adds another important component to the firm’s functionality which currently is among the most versatile and comprehensive in the world.

Staking provides participants with a passive income, hence its popularity and in offering the chance to participate in creating the new currencies of the future, many cryptocurrency enthusiasts are now taking their part in staking. CoinMetro’s XCM staking which began earlier this year allowed XCM holders can stake their tokens on CoinMetro’s staking platform to earn more XCM while reducing the supply of circulating XCM in the market.

Takeup was rapid and enthusiasm was very high, demonstrating that the cryptocurrency community has bought into being part of the development of decentralized finance.

In the case of Parallel Finance, the company is exploring participating in Polkadot and Kusama crowd auctions. In order to launch a parachain on Polkadot’s mainnet, projects need to win a crowd loan.

There are only 100 parachain slots on the Polkadot network as of now, meaning there are only 100 projects that can operate on the main network until further notice, and the crowd loan is the only way currently for new parachains to connect to the Polkadot network.

This is a humble beginning but a high value investment, highlighting the interest in DeFi protocols by those in the know. Protocols such as this have been of great interest recently to end users too, with hedge funds getting in on the action.

Just a few weeks ago, Grayscale, which is a subsidiary of Digital Currency Group, developed an institutional grade fund and index which is aimed at meeting increasing interest in DeFi assets from a broad base of existing and prospective investors.

The idea of the fund is to give investors a chance to invest in DeFi protocols through a single investment vehicle, and of particular interest is the width of exposure to Uniswap, which is a decentralized finance protocol that is used to exchange cryptocurrencies.

The focus on Uniswap as a DeFi vehicle in institutional fund management is interesting, largely because one of the main advancements that have come about as part of the recent introduction of Uniswap v3 is that liquidity providers can provide liquidity with up to 4000x capital efficiency relative to Uniswap v2, earning higher returns on their capital.

The empowerment of the DeFi community is now multi-faceted, and is the darling of investors. The future is already here.