Kollider Raises $2.4M to Create ‘Lightning-Native’ Financial Products

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Bitcoin derivatives exchange Kollider has closed a $2.35 million seed funding round led by Lemniscap, with participation from Castle Island Ventures, Polychain Capital, Alameda Ventures, Pfeffer Capital, Okex and other investors.

The company intends to use the funds to expand its exchange business and add more native Lightning financial tools to its existing product line. Lightning is a network built on top of the Bitcoin blockchain that helps make bitcoin transactions faster and cheaper.

Kollider refers to its core product as “the world’s first native Lightning derivatives exchange”. The company is also working on synthetic bitcoin-backed stablecoins and a Lightning-enabled bitcoin wallet.

“We had to test the exchange in combat. It’s an exchange built entirely from the ground up,” Kollider co-founder Konstantin Wünscher told CoinDesk in an interview. “We’ve improved it, built on it, and added features you can’t get anywhere else, especially native Lightning integration.”

Read more: Move over, Ethereum – Bitcoin’s Lightning Network has applications too

What is a “Lightning-native” derivatives exchange?

Most derivatives exchanges require users to fund their accounts before trading. This process can be fast or slow depending on the asset in question. Cryptocurrencies like bitcoin typically require up to six confirmationswhich usually takes about an hour.

Kollider seems to have found a way around Bitcoin’s annoying latency – the native Lightning integration.

“Kollider Exchange leverages Bitcoin’s Lightning Network to allow users to instantly open and close positions directly to and from their Lightning wallets. fund accounts,” the Kollider team said in a statement provided to CoinDesk.

According to the Kollider website Documentationusers who don’t use Lightning can still do old-school bitcoin chain deposits.

Synthetic stablecoins backed by Bitcoin

Historically, bitcoin has exhibited high volatility characterized by wild price swings, making it largely unsuitable for day-to-day payments (although bitcoin’s volatility is currently at a two-year low). This is where stablecoins come in. A stablecoin is a cryptocurrency or asset-backed token designed to minimize price volatility.

Read more: Bitcoin Flat as Volatility Hits 2-Year Low and Stocks Rise

Synthetic stablecoins are a bit more abstract and essentially mimic stablecoins without creating an actual stablecoin token. If a synthetic stablecoin is backed by bitcoin, it achieves stability by simultaneously maintaining a long (buy) and short (sell) position in bitcoin.

“The idea is that when you hold bitcoin, obviously you are long. But then you use a futures contract and you lose bitcoin at the same time,” Wünscher explained. “When the price goes up, the bitcoin you hold will obviously appreciate and the value of the short position will depreciate and they will cancel out. You are essentially taking a neutral position in the market.

But it does not stop there. Since short positions can be taken in multiple fiat denominations, Kollider users can then create synthetic stablecoins pegged to a diverse range of currencies.

“So if you are short in the euro bitcoin market, you peg it to the euro. If you go short in the bitcoin USD market, you peg it to the US dollar. pretty much peg yourself to any fiat currency as long as there is a futures market that allows you to short bitcoin,” Wünscher said.

Another feature of Kollider’s synthetic stablecoin model is the absence of overcollateralization (placing collateral that is worth more than the stablecoin itself). Decentralized finance (Challenge) project ManufacturerDAO is famous for its oversized Ethereum stablecoin, AID.

MakerDAO’s over-provisioning rate for DAI was 170% last August. In other words, users would need to deposit $170,000 collateral in ether (ETH) to receive the equivalent of $100,000 in DAI.

Read more: How does MakerDAO work? Understanding the “Central Bank of Crypto”

“[With Kollider] you don’t need to oversize, you just put in the base amount that you are going to keep for a long time. You are simultaneously short of that, so your exposure is zero; even if the price moves both ways,” Myles Snider, head of marketing and business development at Kollider, explained in an interview with CoinDesk.

Kollider’s synthetic stablecoins are now in “alpha”, which means users can test them with small amounts. “We have strict limits, but we continue to test and improve,” Snider said.

The Kollider Lightning Wallet

Another key product that has yet to be fully unveiled is the Kollider Lightning Wallet. The company describes it as a Google Chrome extension that will be fully integrated with Kollider stablecoins and other Kollider ecosystem apps.

“Users will be able to easily move funds between a BTC balance, a USD balance and a EUR balance with a clear and easy to use interface,” the company told CoinDesk in the statement.

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