Cega Finance, the first decentralized finance exotic structured products protocol, announced that it raised a $4.3M seed round led by Dragonfly Capital Partners with participation from Pantera Capital, Coinbase Ventures, Alameda Research, Solana Ventures and more.
“DeFi derivatives have seen explosive growth in the last year, and we find that the market is still in its early days.”
Cega is building the next evolution in DeFi derivatives by bringing exotic derivative capabilities to crypto. The raise comes off the back of a strong team composed of a former options trader, experienced developers, and former Y Combinator founders.
The team looks to explore the untapped multi-trillion dollar opportunity of DeFi derivatives. Although the nascent crypto derivatives market is already $3B dollars, it is still <0.02% of the traditional finance market.
Cega’s product is a decentralized application built on Solana that combines basic options (e.g. call/put) with advanced options characteristics to create packaged offerings for investors. Its first exotic options product is the fixed coupon note, which is a basket of puts and a call with knock-in and knock-out barriers. This exotic structured product benefits retail investors by offering a superior yield, built-in downside protection, and compounded returns. It also benefits market makers by providing a discounted hedge for their portfolio as well as allowing proprietary gains through hedging trades.
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“DeFi derivatives have seen explosive growth in the last year, and we find that the market is still in its early days.” said Arisa Toyosaki, former derivatives trader and co-founder and CEO of Cega. “DeFi experienced >300% CAGR in the last 2 years and has 4M users today. We believe that a product offering which generates high yields and better safety for users during the volatile period of crypto expansion will be essential to the growth of the entire ecosystem.”
The funds will be used to accelerate the development of Cega’s technology as well as to create a vibrant community focused on expanding product offerings, calibrating statistical models, and educating users about DeFi and derivatives.
“Cega is changing the DeFi space.” said Tom Schmidt, General Partner at Dragonfly Capital Partners. “DeFi goes through a process where one team creates an innovative breakthrough financial primitive, which in turns spurs the creation of a whole new category of products and grows the overall market. We’ve seen this with Uniswap for AMMs and Compound for money markets, and I think the Cega team is going to do this for exotic derivatives and structured products, a badly needed gap in the DeFi industry. We’re super excited to be backing them and moving this entire market forward.”
“Cega is opening up a new layer of untapped potential in decentralized derivatives, where we see a multi-trillion dollar opportunity to disrupt traditional finance.” says Joey Krug, Co-Chief Investment Officer, Pantera Capital. “Exotic options have proven to be valuable tools for transforming and managing risk – now DeFi gives us the chance to re-cast those tools with greater transparency and efficiency.”
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In addition, Cega is supported by a number of market making partners. Brian Lee, Partner at Alameda Research said “Alameda is excited to support Cega because we believe that exotic derivatives are the next evolution in defi. In traditional finance we’ve seen market expansion driven by innovation in derivatives and we believe that the Cega team has the ability to push these frontiers for crypto”.
Cega will be revolutionizing the DeFi space by offering a capability that is new to the entire ecosystem. Exotic derivatives with high yield and built-in protection for users is a much needed primitive, and Cega has seen strong traction so far with protocol partners and institutional players in investing in its products. The widespread adoption of the products will help push forward a new frontier of DeFi.
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