Salvadoran wallet developer Galoy raised $4 million
Galoy, a company developing bitcoin banking software in El Salvador, has announced a $4 million fundraiser led by Hivemind Ventures. Other participants include Valor, Kingsway Capital and AlphaPoint.
Galoy Company, founded in 2019Nicholas Bertie andBy Chris Hunter, provides a set of tools that allow merchants and consumers to use the Lightning network for payments and create tools for bitcoin-based banking services.
The Lightning Network is a payment layer that runs on top of the Bitcoin network and promises cheaper and faster transactions for Bitcoin payments.
Galoy technology is at the heart of the Bitcoin beach wallet in El Salvador and the Bitcoin jungle app in Costa Rica.
The new funds will help further develop GaloyMoney, an open source bitcoin banking platform that helps organizations access and integrate bitcoin payments into their services using the Lightning network.
"Galoy significantly lowers the barrier for any community or organization to become their own bank and connect to the world's first open money and payment standard," said Max Webster, founder of Hivemind Ventures.
Other investors in the round include Valor, Timechain, El Zonte Capital, Kingsway Capital, Trammell Venture Partners and AlphaPoint.
At the end of last year, Galoy closed a $3 million seed round led by Craft Ventures.
Launching a new synthetic dollar
Along with the new fundraising, Galoy is also launching a feature on its platform called Stablesats, which is a derivative contract to create a bitcoin-backed synthetic dollar pegged to the US dollar.
This feature will give users access to a US dollar account in their Lightning wallet and aims to secure day-to-day payments by eliminating the impact of short-term volatility in exchange rates between the dollar and bitcoin, according to the release.
The user can convert their bitcoins into US dollars in the app to fix a certain exchange rate. Behind the scenes, Stablesats uses bitcoin derivatives markets and a reverse perpetual futures contract, also known as a reverse perpetual swap, to make this possible.
This means that Galoy will close the current amount in US dollars at a pre-determined bitcoin price to fix the exchange rate, according to the website. Since the contract is indefinite, its validity period does not expire. When the contract is settled, it is done in Bitcoin, which avoids the need to touch US dollars.
"Although the dollar value of their BTC account fluctuates, $1 in their USD account remains $1 regardless of the bitcoin exchange rate," Bertie said in the release.
Derivatives are a complex trading product, and the Stablesats website lists several risks inherent in using a product based on a derivative financial instrument, including counterparty risk and the possibility of automatic deleveraging.
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