A group of crypto industry heavyweights are set on bringing the rather specialized world of decentralized finance (DeFi) to the masses.
Announced Wednesday, Alameda Research, a well-known trading firm within the crypto space, is leading a $40 million investment round in Oxygen, which aims to do for DeFi what Robinhood has done for stocks – only without the reliance on centralized legacy settlement systems. Alameda is joined by Multicoin, Genesis Capital and CMS in the round.
Oxygen is built on Solana, a blockchain that can handle 50,000 transactions per second, compared to Ethereum’s 15 or so transactions per second. In a press release, Alameda said Oxygen will be integrated into Maps.me, a mobile alternative to Google Maps with about 100 million users.
Notably, Alameda led a $50 million investment in Maps.me earlier this year. Genesis and CMS also participated in that round. (Genesis is a CoinDesk sister company.)
“On the back end you want the most powerful things you can have, but on the front end you want the most simple things you can have,” Alameda CEO Sam Bankman-Fried said in an interview, adding:
“So all you need to show [users] of Maps.me is that if they want to lend out some dollars, they can get 12% per year. But behind it, there’s a full prime brokerage model on-chain that's capable of powering borrowing, lending, derivatives, structured products, portfolio margin and a lot of other things.”
Next-gen prime broker
“DeFi prime brokerage,” the elevator pitch for Oxygen, is almost a contradiction in terms; the white-glove service banks offer to big buy-side firms is far removed from protean lending pools of crypto, matched using Ethereum-based smart contracts.
Oxygen is not going to be prime brokerage in the sort of white-glove sense, Bankman-Fried said, but rather the protocol acts as a venue, catering to the needs of DeFi applications, financial institutions and individual users.
Those users custody their own keys to a Solana wallet, which is lending the assets on the Oxygen protocol. If they are starting out with dollars, a U.S. bank account can hook up via fintech facilitator Plaid. Thereafter a transfer to Circle’s Silvergate account will result in USDC stablecoins automatically being minted on the Solana blockchain.
“To understand where that yield is coming from,” said Bankman-Fried, “on one side you have non-crypto people lending dollars and earning interest. One the other, are people looking to invest in crypto projects. They tend to be pretty bullish and are willing to pay significant interest rates in order to have the right to get longer crypto.”
All fine and well, but what about the risks associated with the Wild West of DeFi? To begin with, Oxygen.org AG is based in crypto-friendly Switzerland. It also works with a Big Four audit firm (name not disclosed) to keep an eye on how assets are handled and for general regulatory compliance.
“The places where fiat comes in and out of the system are where KYC [know-your-customer] is happening,” said Bankman-Fried. “On the safety side of things, I think one of the most remarkable things about DeFi is how little money has been lost to hacks. It’s not nothing, but at like $200 million or something, it’s less than a percent.”