The world of decentralized finance or DeFi—a Lego-like stack of services that let people trade and lend without intermediaries—is expanding rapidly, and coming to include more and more elements from the traditional sphere of finance.
One recent example is Yield, a startup that launched in early 2020, and on Wednesday announced a $10 million funding round led by blue-chip crypto investment firm Paradigm.
Yield is one of a growing number of startups to offer fixed-rate lending, a relatively new innovation in DeFi, which initially only let users borrow and lend at variable rates. This is an important development as fixed-rate offerings provide reliable income and are a cornerstone of traditional finance.
The specific product Yield offers is akin to zero-coupon bonds in the conventional finance world but consists instead of tokens worth a fixed amount that borrowers can sell at a discount to obtain capital.
Yield has developed its own protocol, Yield Protocol, which operates atop the Ethereum blockchain. As part of its Wednesday announcement, Yield also revealed that its platform will soon offer fixed-rate loans integrated with MakerDAO, the Ethereum-based project that mints the DAI stablecoin.
All of this part of what Yield founder and CEO Allan Niemerg described in a blog post as “Version 2 of the Yield Protocol.” Niemberg added that the new version will serve to expand the number of assets Yield can collateralize and that it is “gas efficient”—a term that refers to low blockchain transaction costs.
“The work Yield has done in DeFi with its fixed-rate lending protocol is foundational for the space. We’re looking forward to continuing to work closely with them as they create new financial primitives and tools on Ethereum,” said Paradigm executive Dan Robinson in a statement explaining the firm’s investment.
Yield isn’t the only crypto startup seeing opportunity in fixed lending. In March, a startup called Element announced it had raised $4 million from the venture firm Andreessen Horowitz and others to make fixed, high yield DeFi loans easier to access. Meanwhile, research firm Messari cited Yield, along with fixed income projects called Notional Finance and yUSD, as “the next wave of DeFi innovation.”
In addition to Paradigm, Framework Ventures contributed to the Yield funding round, along with Symbolic Capital Partners, CMS Holdings, Variant, and the DeFi Alliance.