ParaFi Capital, a San Francisco-based investment firm focused on blockchain and decentralized finance, has invested in Kyber Network ahead of its planned Katalyst upgrade.
Announced Friday, the two entities have also formed a partnership to prepare for the launch of KyberDAO with the intention of increasing adoption of Kyber's on-chain liquidity protocol. KyberDAO is planned as a community platform for the decentralized governance of the network.
Coming at a time when decentralized finance, or DeFi, is booming, the investment from ParaFi was made in the form of an undisclosed direct purchase of Kyber Network Crystals (KNC), the project's native token. Kyber Network is an Ethereum-based protocol that aims to aggregate liquidity and facilitate swaps for ERC-20 standard tokens.
Kyber aims to draw on ParaFi's experience in DeFi as well as the firm's knowledge of investing and market making to build liquidity infrastructure, the Kyber team said.
“ParaFi Capital has been a driving force in the governance and growth of DeFi. With their support and active participation in KyberDAO, we are confident that we can bring Kyber’s role as the liquidity layer for DeFi to the next level,” Kyber CEO Loi Luu said.
The investment firm will also participate in Kyber's governance, or community decision-making, by staking KNC and voting on KyberDAO using its purchased tokens. Kyber said ParaFi will also connect professional market makers to DeFi through Kyber’s liquidity supply system called Fed Price Reserve (FPR).
ParaFi is best known for having received investment capital from billionaire Henry Kravis, co-founder of KKR, in June 2019. It has also had backing from Bain Capital Ventures and Dragonfly Capital Partners. According to Crunchbase, ParaFi previously invested in crypto exchange Coinbase and stablecoin developer MakerDAO.
“We have been working closely with the Kyber team on their crypto-economic re-design and transition to a decentralized autonomous organization (DAO) with Katalyst. Kyber’s growth trajectory and breadth of integrations across the DeFi stack are impressive, as it evolves to become a liquidity protocol for the ecosystem,” said Santiago Roel Santos, partner at ParaFi Capital.
DeFi has been a hot topic in recent days, with the emergence of Compound (COMP). The project which is carving out a sizeable portion of the DeFi market share, placing at the top of the list in terms of total market value. Capitalizing on the buzz, FTX, a crypto derivatives exchange, recently moved to list derivatives based the token just days after it launched.
"DeFi is really at the forefront of blockchain and crypto innovation," according to David Freuden, co-author of a recent report titled "DAO — A Decentralized Governance Layer for the Internet of Value."
"I believe DeFi protocols will continue to experience an explosion in interest for years to come," he said.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.