A group of VC heavyweights and crypto entrepreneurs, including Blockfolio founder Ed Moncada, are backing a new risk management tool in the wake of the big boom in the decentralized finance (DeFi) industry.
The Cozy Finance plan
According to an official announcement on Thursday, Cozy Finance raised $ 2 million in a loan led by Electric Capital and which includes Variant Fund, Dragonfly Capital, Robot Ventures, Slow Ventures, Volt Capital, Spencer Noon, Moncada and others.
The team, looking to bring some order to the creative chaos that DeFi is currently, is made up of Cozy co-founders Tony Sheng, formerly Multicoin Capital, and Payom Dousti, co-founder of Rare Bits, a peer market. -to-peer for crypto products.
The value of assets deposited in Ethereum-based DeFi dapps - here the quotation in real time - it has risen from $ 1 billion to over $ 8 billion in just six months. Developers have unlocked tremendous value for crypto investors by creating useful ways to manage their assets.
However, these users face new forms of risk, such as irreversible technical vulnerabilities. "As DeFi grows, a recognized and important lack is that of tools that allow people to manage their risk appropriately," said Electric Capital co-founder Avichal Garg. “Tony and Payom have deep experience in cryptocurrencies and have many new ideas on how to create risk management tools. We are thrilled to work with them ”.
DeFi coverage options
At the moment, DeFi's transformational potential is hampered by a lack of adequate risk management tools, the companies said in a Medium post. “Today, the most common method of risk management is 'position sizing': even the most active users and funds are not distributing as much capital into the ecosystem as they would like,” Sheng said.
“Part of this is due to the fact that the demand for risk management tools currently exceeds supply. The other part is that we have yet to see a truly "native DeFi" way of managing risk. "
There are also other players looking to make DeFi safer, including London-based Nexus Mutual, which runs a decentralized risk pool designed to protect itself from DeFi smart contract blow-ups - something that appears to be considered a more acceptable risk in the last times.
But Sheng disagreed that blow-ups are simply an integral part of the nascent DeFi economy. "I don't think anyone agrees that we should learn by making mistakes with user deposits," he said.
“Big blow-ups have brought the whole industry back. Better risk management is a key factor for greater experimentation ”. When asked how Cozy Finance draws inspiration from risk management in traditional finance, Sheng said that DeFi's unique risks require unique solutions. “We are building something that is - in our opinion - quite new. What we plan to launch will look like nothing on the market today, ”he said.
