Bitcoin-native banking software company Galoy this morning announced a $4 million fundraise led by Hivemind Ventures.
Co-founded in 2019 by Nicolas Burtey and Chris Hunter, Galoy provides a suite of tools that enable merchants and consumers to use the Lightning network for payments and create tools for bitcoin-native banking services.
The Lightning network is a payment layer that sits on top of the bitcoin network, promising cheaper and faster transactions for bitcoin payments.
Galoy’s technology powers the Bitcoin beach wallet in El Salvador and the Bitcoin jungle app in Costa Rica.
The new funds will help further the development of GaloyMoney, which is an open-source bitcoin banking platform that helps organizations access and integrate bitcoin payments into their services using the Lightning network.
“Galoy dramatically lowers the barrier for any community or organization to become their own bank and plug into the world’s first open monetary and payments standard,” said Max Webster, the founder of Hivemind Ventures, in a press release.
Other investors in the round include Valor, Timechain, El Zonte Capital, Kingsway Capital, Trammell Venture Partners and AlphaPoint.
At the end of last year, Galoy closed a $3 million seed round led by Craft Ventures.
New synthetic dollar launch
Alongside the new fundraise, Galoy is also launching a feature on its platform called Stablesats, which is a derivatives contract that creates a bitcoin-backed synthetic dollar pegged to the US dollar.
The feature will give users access to a US dollar account within their lightning wallet, and aims to power everyday payments by removing the exposure to the short-term volatility of exchange rates between the dollar and bitcoin, per the release.
A user can transfer their bitcoin to US dollars in the app to lock in a certain exchange rate. Behind the scenes, Stablesats is using bitcoin derivatives markets and an inverse perpetual futures contract, also known as inverse perpetual swap, to make this possible.
This means Galoy will short the current amount of US dollars at a predetermined bitcoin price to lock in the exchange rate, according to the website. As the contract is perpetual, it avoids expiry. When the contract is settled it is done so in bitcoin avoiding the need to touch US dollars.
“While the dollar value of their BTC account fluctuates, $1 in their USD account remains $1 regardless of the bitcoin exchange rate,” said Burtey in the release.
Derivatives are a complex trading product and the Stablesats website lists several risks inherent in using a product built on a derivative instrument, including counterparty risk and the potential for auto deleveraging.
© 2023 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.