Polkadot-based DeFi project Equilibrium raises $2.5 million in new funding

Equilibrium, a Polkadot-based interoperable decentralized finance (DeFi) project, has raised $2.5 million in Series A funding.

The funds were raised via a token sale, Equilibrium CEO Alex Melikhov told The Block.

Investors, including CMS Holdings, KR1, Signum Capital, AU21 Capital, and Genesis Block Ventures, purchased Equilibrium's EQ tokens, said Melikhov.

With the investors on board, Equilibrium looks to participate in an upcoming Parachain Lease Offering of Polkadot and win a parachain slot. The offering is starting April 12 and will last for 14 days, said Melikhov.

Parachains are shards or part of the Polkadot network. Winning a parachain slot would help Equilibrium connect with the Polkadot ecosystem and interact with other parachains, i.e., other projects and bridges, Melikhov told The Block.

Polkadot has a set limit of 100 parachain slots to be offered. "The market cap of each project with the slot will be a cap of Polkadot, divided by the number of slots," Melikhov told The Block. "Rough expectation of market caps for parachain projects is $420-430 million each."

"The fully diluted valuation of Equilibrium is $320 million (based on the swap rate for Phase 1 of the Parachain Lease Offering)," said Melikhov.  So if the project wins a parachain slot and its market cap increases, the investors would gain.

"After a parachain leasing slot is secured, the path is free for the value of our token to grow," said Melikhov.

Equilibrium has estimated that it would require 1 million Polkadot's DOT tokens (currently worth nearly $40 million) to win a parachain slot. Some of the Equilibrium's investors are expected to stake DOT tokens so that the project could win a slot, Melikhov told The Block.

"They can participate either in a swap (swap DOT for EQ) or to stake in a crowdloan," said Melikhov.

The Series A round brings Equilibrium's total funding to date to $8 million. Last October, the project raised $5.5 million.