Algorand sets up $330 million fund that's focused on DeFi
September 10, 2021, 7:11AM EDT
1 min read
Blockchain platform Algorand created a $330 million decentralized finance (DeFi) fund today, to encourage growth of DeFi on Algorand.
Algorand is a proof-of-stake protocol with high transaction speeds that was created by computer scientist Silvio Micali. It has a two-layer system for operating both normal transactions and complex DeFi ones. Plus, when new blocks are made, rewards are handed out to those who hold its native coin, the ALGO.
The fund will be focused on growing out the DeFi ecosystem on the Algorand platform. DeFi is a growing subsect of crypto that's focused on financial tools like lending, borrowing and trading with synthetic assets — but in a decentralized fashion. DeFi rose to popularity on the Ethereum blockchain but other rival chains are seeking to emulate its success.
The fund will be in the form of ALGO tokens, to be handed out to potential projects. It takes the form of 150 million ALGO, worth $334 million at current prices.
Not to be outdone, Harmony, a blockchain platform designed for running Ethereum applications, similarly announced a $300 million fund today. It's focused on attracting projects that are already running on other blockchains, such as Ethereum, and scaling solutions xDai and Polygon.
With more than $100 billion in market cap across all chains, it is likely that the DeFi market cap will grow to $200 billion by 2025. However, many users still face various technical barriers when using decentralised platforms to do on-chain farming, staking and trading, while off-chain solutions face liquidity issues, fiat restrictions and the lack of a central multichain to support crypto assets and institutional-grade custodians.
The Federal Reserve dropped a new central bank digital currency white paper on Thursday. While largely avoiding the topic of crypto, it suggests that a US CBDC could compete with "private digital money."