India-based DefiDollar has raised $1.2 million in a seed round led by Divergence Ventures, Standard Crypto and Accomplice. The goal: to build an index for hedging the risks associated with different types of stablecoins.

DefiDollar believes users need to diversify risks through a stablecoin aggregator. Take, for example, the censorship risks associated with stablecoins like USDC and USDT that are fiat-backed and issued by known entities. Conversely, crypto-collateralized stablecoins like dai may face smart-contract risks and tend to see slight fluctuations in price that make them less stable than they may sound.

That’s where DefiDollar and its “metastable” DUSD token comes in.

“It’s an insurance layer over existing avenues in DeFi,” co-founder Siddhartha Jain told CoinDesk. “There are a lot of different risks that are present in the ecosystem, the same sort of risks which banks pose because the issuing entity is centralized or probably has blacklisting mechanisms.” 

Born of the ETHGlobal HackMoney hackathon in May 2020, DefiDollar launched into a live product on the Ethereum mainnet in six months and currently handles $3 million in volume, Jain said. DUSD is collateralized by Curve Finance LP tokens, according to the project’s documentation.

The company recently announced a governance token, DFD, that will be distributed through a liquidity mining scheme referred to as Initial Liquidity Mining Offering (ILMO). The DFD ILMO is set to go live this week. 

Read more: Origin Debuts OUSD, a Stablecoin That Works Like a Savings Account

“Other projects usually do their liquidity mining based on ETH or another stablecoin,” said co-founder Arpit Agarwal. DefiDollar users can use the project’s native stablecoin, DUSD, to generate DFD rewards. 

Unlike other token launches, users can claim this initial supply by depositing DUSD and then play a three-day waiting game for the token to launch in full. 

DefiDollar co-founders told CoinDesk that after this timeframe, they expect there to be a significant amount of liquidity on the staked tokens when DFD officially launches next week.