Led by Delphi Digital’s venture arm, zkLend has just raised $5 million in a seed round, with participation from Starkware and Three Arrows Capital.
Alameda Research, MetaCartel DAO, Amber Group, Genesis Block Ventures, and others also joined in the raise.
The crypto money market is similar to current iterations like Aave or Compound, except zkLend is built using an Ethereum-centric scaling technology called zk-rollups.
These are what’s known as a “layer 2” solution as they move transactions off of Ethereum’s mainnet (or “layer 1”) onto sidechains to reduce network congestion. Every so often, evidence of transactions made on a rollup is then turned into a single transaction and sent to the mainnet to be verified.
The specific iteration of zk-Rollups that zkLend will use has been built by the developer group Starkware.
With its latest funding in hand, zkLend will launch its permissionless lending product in Q3 2022. This retail-facing product, called Artemis, will let users earn interest on various cryptocurrencies. The first iteration will include stablecoins, Ethereum, and Bitcoin, a co-founder and co-project lead at zkLend Brian Fu told Decrypt.
After that, the team will roll out similar offerings “to cover the most traded assets within the Ethereum Layer 1 and Layer 2 ecosystems,” he added. The final iteration will include smaller “long-tailed assets.”
zkLend is will also launch an institutional product called Apollo in early 2023. Unlike Artemis, Apollo will require interested entities to perform standard AML and KYC standards. “We envision Apollo to draw in more crypto-native institutions such as funds, prop shops, and market makers as our first users,” Fu said.
After that, though, Apollo is focused on attracting more traditional players.
“We believe there is a massive opportunity with banks, private debt players, payments service providers in the traditional space, not to mention family offices, and private investment and/or corporate treasury arms of smaller private companies,” said Fu.
zkLend takes on DeFi ‘blue chips’
Attempting to overtake popular money markets currently available will be challenging, but Fu and his team hope zkLend will attract users for more than just its ability to scale quickly.
For one, the Artemis product “will target DeFi protocol-to-protocol lending once fully established, addressing the debt financing needs of ‘blue chip’ DeFi protocols while enabling them to make their treasury assets more productive through lending,” said Fu.
He added that Apollo will also unlock under-collateralized borrowing thanks to its “robust KYC vetting process and on-chain verification.”
This variety of borrowing is common in traditional finance but has yet to really take off in the world of crypto. Instead, users are expected to provide more collateral than the amount that they would be borrowing (called over-collateralization).
zkLend will also employ “dedicated institutional reps” to help larger institutions join the platform, said Fu. The dedicated staff will serve to "bridge the compliance requirements specific to each institution, provide assistance and oversee the onboarding process, and integrate the protocol’s lending and borrowing capabilities with the institutions’ business operations," he added.
After that, like many popular DeFi platforms, zkLend will implement a native token, called ZEND, to incentivize users to add their liquidity. According to marketing materials, this token will be used to vote on proposals, boost rates for holders, revenue sharing, and staking rewards.
The token isn't yet public, but dates will soon be announced, according to Fu.