Toronto-based Atomic Loans, which is creating a platform that facilitates peer-to-peer bitcoin lending, has raised $3.4 million CAD ($2.45 million USD) in seed funding.
This financing round brings the total amount raised to date by Atomic Loans to about $3.6 million CAD ($2.6 million USD).
Atomic Loans offers a peer-to-peer platform for users to engage in bitcoin-backed loans.
The round was led by Initialized Capital, with participation from ConsenSys and Morgan Creek Digital, in addition to Joe Lallouz and Aaron Henshaw of Bison Trails. The new funds will be put toward the company’s research and development efforts and will allow Atomic Loans to work to grow decentralized finance adoption on bitcoin with strategic partners.
Atomic Loans aims to bring decentralized finance to the bitcoin market. Decentralized finance in the crypto space refers to financial applications that are being developed on top of blockchain systems.
“Bitcoin is a currency where much of its value is derived from being open, transparent, borderless, and censorship-resistant. It runs 24/7 and you never need someone’s permission to use it,” said Tony Cai, co-founder and CEO of Atomic Loans. “We want to help build a future where financial tools for bitcoin can share every single one of those characteristics as well.”
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Although cryptocurrencies are built on decentralized technology, lending platforms and exchanges can either be centralized or decentralized in how they operate. Centralized exchanges represent blockchain-based assets within an internal database that only the exchange can control. One example of a type of centralized exchange is QuadrigaCX, which lost access to $250 million in cryptocurrency last year after its CEO, the only person who had access to the exchange’s cold wallets, passed away. Popular centralized exchanges include Coinbase and Kraken.
Ethereum, which is a cryptocurrency and ledger technology, has allowed for more decentralized applications. Due to the fact that bitcoin is just a cryptocurrency, not a ledger technology, it has been relatively untapped by decentralized finance.
Atomic Loans’ decentralized platform allows borrowers and lenders to engage in peer-to-peer bitcoin-backed loans, without the need for centralized custodians.
Atomic Loans’ offering is a two-sided marketplace for bitcoin-backed lending that allows users to lock their bitcoin in a non-custodial escrow (which means a third party holds and regulates payment of the funds for two parties) and borrow an Ethereum stablecoin. The startup says this allows customers to use their bitcoin to trade or pay for expenses without dealing with tax liability or losing exposure to bitcoin price changes.
“As remarkable as the growth of [decentralized finance] has been to date, little or none of it works natively on bitcoin. This leaves out what is far and away the largest and most valuable crypto-asset,” said Brett Gibson, partner at Initialized Capital. “Atomic Loans is leveraging their deep expertise in bitcoin scripting and atomic swaps to create a useful [decentralized finance] product that works on the bitcoin blockchain directly without requiring complex synthetics on other blockchains.”
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Atomic Loans was founded in January 2019 and previously raised a $200,000 pre-seed round from ConsenSys. In recent months, Atomic Loans has completed two security audits with third-party auditors and launched a closed beta for its lending service.
Min Teo, partner at ConsenSys Labs, claimed that Bitcoin will be a core component of decentralized finance activity.
“The vision of creating a parallel financial system that is permissionless and open to all is one that transcends across chains and communities, and we are proud to continue our support for Atomic Loans who are at the forefront of realizing this vision in a trust-minimized manner,” she said.
Image courtesy Atomic Loans