Galoy, the company behind the open-source banking platform that powers El Salvador’s Bitcoin Beach Wallet, started offering its Stablesats product Wednesday.

It also said it completed a $4 million capital raise to enable further development of its core GaloyMoney bitcoin banking platform.

Stablesats is intended to provide an alternative to current stablecoin infrastructure and regular-way bank integration by using derivatives contracts to create a bitcoin-backed synthetic dollar pegged to the U.S. dollar.

The company believes that allowing dollars to flow through bitcoin (BTC) will help solve short-term volatility price risk, which currently stands as one of the biggest hurdles to the growth of bitcoin as a means for casual payments.

“Bitcoin has brought digital transactions to previously unbanked communities across Latin America, Africa and beyond,” said Galoy CEO Nicolas Burtey in a press release. “However, its volatility makes managing financial obligations difficult. With Stablesats-enabled Lightning wallets, users are able to send from, receive to, and hold money in, a [U.S. dollar] account in addition to their default BTC account. While the dollar value of their BTC account fluctuates, $1 in their USD account remains $1 regardless of the bitcoin exchange rate.”

In addition to announcing Stablesats, Galoy announced a $4 million capital raise to enable further development of its core GaloyMoney bitcoin banking platform, a versatile application programming Interface (API) and an enterprise-ready Lightning Network gateway intended to allow organizations easy access to Lightning payments.

Hivemind Ventures led the round with participation from Valor Equity Partners, Timechain, El Zonte Capital, Kingsway Capital, Trammell Venture Partners and AlphaPoint.

“Galoy dramatically lowers the barrier for any community or organization to become its own bank and plug into the world’s first open monetary and payments standard,” said Max Webster, founder of Hivemind Ventures.

“Because it’s open source," he added, "Galoy’s platform benefits from a flywheel effect that can make it the Schelling point for banking software: Each new customer’s implementation improves the security, reliability and capability for all present and future customers.”

In line with Galoy’s open-source ethos, the underlying code for Stablesats can be reviewed on GitHub and on its own dedicated website.

To create the synthetic USD, Stablesats uses a financial instrument invented by the BitMEX cryptocurrency exchange called a perpetual inverse swap using perpetual futures contracts. Futures contracts are a type of agreement to buy or sell a specific asset (such as bitcoin) at a set future date for a set price. Perpetual futures contracts differ in that they are perpetual and don’t specify a future date.

In 2015, BitMEX founder Arthur Hayes – who in May was sentenced to two years of federal probation after pleading guilty to charges he willfully failed to implement an anti-money-laundering program at BitMEX – summarized how a synthetic USD powered by futures could work using his exchange. It involves 1) buying bitcoin, 2) selling a futures contract that locks in current U.S. dollar value of that bitcoin and 3) buying enough futures to maintain balance after spending some of the same bitcoin.

In short, if you buy or sell the appropriate derivatives that change in value in perfectly opposite directions, the holder can hedge the risk of price fluctuations and guarantee the value of their position in U.S. dollar terms. Hayes also outlined how a bitcoin-backed stablecoin could work earlier this year.

Stablesats works similarly using the OKX exchange, and the specific methodology is outlined on GitHub.