In a significant boost to the Bitcoin DeFi ecosystem, Avalon Labs, the issuer of the Bitcoin-backed stablecoin USDa, has successfully raised $10 million in a Series A funding round. The round was led by Framework Ventures with participation from UXTO Management, Presto Labs, and Kenetic Capital.
Unlocking the Potential of Bitcoin DeFi
Avalon Labs aims to transform Bitcoin from a digital store of value into a more active and versatile financial instrument. By enabling users to collateralize their BTC holdings for USDa at a fixed borrowing rate of 8%, Avalon unlocks the value stored in Bitcoin and brings it into the world of decentralized finance.
“We believe Bitcoin has immense untapped potential in the DeFi space. Our mission is to build the infrastructure that allows BTC holders to put their assets to work and participate in the rapidly evolving DeFi ecosystem.”
— John Wu, CEO of Avalon Labs
The Mechanics of USDa
USDa is a stablecoin fully backed by Bitcoin collateral. Users can mint USDa by locking up their BTC at a collateralization ratio of 150%. This means that for every $1 worth of USDa minted, $1.50 worth of BTC must be pledged as collateral.
- Mint USDa by collateralizing BTC at 150% ratio
- Redeem USDa for underlying BTC collateral
- Fixed borrowing rate of 8% on minted USDa
The fixed borrowing rate of 8% on minted USDa provides a predictable cost of capital for borrowers while offering attractive yields to USDa holders. This mechanism aims to create a stable and sustainable Bitcoin-backed lending market.
Expanding the Avalon Ecosystem
In addition to USDa, Avalon Labs offers a suite of Bitcoin DeFi products including Bitcoin-backed lending, yield-generating savings accounts, and a crypto credit card. The fresh capital from the Series A round will be used to further develop these offerings and expand the Avalon ecosystem.
“We’re excited to back Avalon Labs in their mission to grow Bitcoin DeFi. The team has built an impressive foundation with USDa and we believe they are well-positioned to become a leading player in this nascent but high-potential space.”
— Michael Anderson, co-founder of Framework Ventures
The Growth of Bitcoin DeFi
The success of Avalon Labs and USDa is a testament to the growing interest in Bitcoin DeFi. As the original and largest cryptocurrency, Bitcoin has a massive untapped potential in the world of decentralized finance.
By creating Bitcoin-native financial instruments and platforms, projects like Avalon Labs are opening up new opportunities for BTC holders to earn yield, access credit, and participate in the broader DeFi ecosystem. This trend is likely to accelerate as more investors recognize the potential of Bitcoin beyond just a store of value.
The Future of Stablecoins
The rise of Bitcoin-backed stablecoins like USDa also highlights the evolution of the stablecoin market. While most leading stablecoins are currently backed by fiat reserves, crypto-collateralized stablecoins are gaining traction as a more decentralized and censorship-resistant alternative.
| Stablecoin | Collateral Type | Collateralization Ratio |
| USDa | Bitcoin | 150% |
| DAI | Ethereum and other crypto-assets | 150% |
| USDC, USDT, BUSD | Fiat reserves | 100% |
As the stablecoin market matures, we can expect to see a more diverse range of collateral models and stability mechanisms. Bitcoin-backed stablecoins like USDa offer a compelling combination of stability, decentralization, and Bitcoin-native yield opportunities.
Conclusion
Avalon Labs’ $10M Series A raise is a significant milestone for the growth of Bitcoin DeFi. As more projects build out the infrastructure for Bitcoin-native financial services, we can expect to see accelerating adoption and innovation in this exciting new frontier of decentralized finance. Keep an eye on Avalon and USDa as they work to unlock the full potential of BTC in the DeFi ecosystem.
