Decentralized Finance (DeFi) is among the fastest growing trends based on blockchain. Well known venture capital firm Andreessen Horowitz has recently invested $25 million in the popular DeFi project Compound Finance, thus continuing its involvement in the field.
Compound Finance, a decentralized open-source interest rate protocol, planting a milestone in the sector by raising $25 million financing round led by Andreessen Horowitz’s a16z crypto fund. The venture capital firm has a history with blockchain and cryptocurrency. Last year, the firm launched a cryptocurrency fund and raised over $350 million in assets. According to Chris Dixon, a general partner and head of the fund, the company sees lots of potential in cryptocurrencies regardless of the market’s volatility.
Record Financing in DeFi
The financing round marks a record as the first DeFi company that raises such a large amount in a single round. Compound Finance is based in San Francisco and uses blockchain and smart contracts to allow its users to borrow and lend cryptocurrencies. Lenders provide the capital and earn interest rates while borrowers can take advantage of that capital by putting cryptocurrencies as collateral.
The company has $103 million worth of crypto locked up in its automated system, according to DeFi Pulse statistics. It is expected to have high potential to generate returns for a large number of users comparable to interest. Founded in 2017, it raised $8.2M seed financing round in 2017. The seed funding is also led by Andreessen Horowitz. Adding the new capital makes a total of $33.2 million.
DeFi’s idea to recreate traditional financial markets on a decentralized platform has gained momentum over the last year. With the increasing interest in decentralized finance, increasing number of projects are receiving notable financial backing from various institutions.