Crypto firm Alameda Research cuts banks to use DeFi for new funds

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Alameda Research, one of the largest crypto trading companies, saves banks from borrowing up to $ 1 billion in new money from peers as it seeks to expand its business in the framework of the first syndicated debt agreement on decentralized financial markets.

The computer-based trading company specializing in buying and selling digital assets is owned by one of the richest men in crypto, Sam Bankman-Fried, founder and CEO of the FTX exchange.

On Thursday, Alameda will tap into a pool of stable funds deposited by five investors for a $ 25 million syndicated loan, which will take place on a blockchain infrastructure provided by the Maple Finance marketplace. It will be the first in a series of draws expected to reach $ 1 billion over the course of a year, with initial lenders including digital asset managers CoinShares and Abra.

Stablecoins are cryptocurrencies linked to other assets, typically the largest and most stable currencies in the world.

The deal with Alameda prevents banks and other intermediaries from arranging the new financing. Instead, it will test the usefulness of decentralized finance or “DeFi” markets, which have exploded in size over the past 12 months.

“The flexibility offered by a decentralized on-chain lending platform like this helps Alameda adapt to [a fast growing] landscape, ”said Alameda Co-Managing Director Sam Trabucco.

The company uses stablecoins for its trading activities and it hopes that by appealing directly to its peers it will get cheaper and faster funding than banks, Trabucco said.

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According to a new study from data firm Elliptic, DeFi markets have grown 1,700% in the past year to reach $ 247 billion in total value stuck in pre-programmed smart contracts. Trading volumes on decentralized exchanges have seen similar growth with over $ 300 billion in transactions completed each month.

But the rapid growth has also seen hacks and thefts soar. Investors have lost more than $ 10.5 billion this year to theft and fraud in DeFi markets, according to Tom Robinson, chief scientist and co-founder of Elliptic. In 2020, these losses amounted to $ 1.5 billion.

“The relative immaturity of the underlying technology has allowed hackers to steal user funds, while deep pools of liquidity have allowed criminals to launder the proceeds of crime such as ransomware and fraud,” a- he added.

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