Stably, a Seattle-based startup developing a service it claims can reduce investors’ exposure to volatility in Bitcoin and other digital currencies’ values, on Thursday announced it has raised $1.2 million in new funding to support Stably’s growth.
Digital currencies, or cryptocurrencies, have attracted significant investor attention and news coverage in recent years. One reason is more mainstream retailers have begun allowing consumers to purchase goods and services using digital currencies such as Bitcoin and Ethereum, rather than paying with cash. Another point of interest has been dramatic swings in some of these currencies’ values. For example, in 2017 the value of one bitcoin rose from less than $1,000 to nearly $14,000. The values of many digital currencies, however, have fallen over the past 13 months. One bitcoin was worth $3.666.51 as of mid-afternoon Friday.
Stably and other upstart tech companies want to help reduce those fluctuations by pegging digital currencies to U.S. dollars and other currencies backed by governments. Digital money collateralized by fiat currency are known as “stablecoins.” Staby calls its coin StableUSD, or USDS.
“Each USDS token is legally backed and redeemable for a U.S. dollar held in escrow accounts managed by Stably’s regulated trustees,” Stably said in its announcement of the new funding round.
Digital currencies differ from traditional ones in many ways. Transactions involve only two parties, with no bank or other middleman acting as an intermediary. When Bitcoins are created or used in transactions, that information is time-stamped and recorded in an online public ledger. These ledgers, called blockchains, are designed to allow users to keep certain transaction data private by encrypting them. Still, there is some data that, by design, cannot be made private, which allows the transactions to be authenticated afterward.
Stably and its competitors see an opportunity in services that give investors the upside of digital currencies—lack of an intermediary and the ability to keep certain information hidden—with less price volatility.
Other stablecoins that compete with StableUSD include Tether and TrueUSD, which is based on a platform developed by San Francisco-based TrustToken.
Stably said in Thursday’s announcement that it has now raised a total of $1.7 million to develop its stablecoin. That’s roughly the amount Stably said it raised in a securities filing that became public earlier this week. The equity funding came from 13 investors, Stably said in the filing.
Stably plans to use about half of the new funding for “operations, software development, marketing, and overhead,” the company said in the filing, and use the remainder to compensate its employees.
The round was led by a group of angel investors based in the Pacific Northwest, Stably said. It included Paul Stahura, co-founder of Kirkland, WA-based Donuts. That company, which sold “top-level” generic Internet domain names like .agency, .live, and .games, was acquired by Abry Partners in September for an undisclosed sum.