Zero-Knowledge Credit Risk Platform X-Margin Raises $8M

X-Margin Credit, a startup that provides crypto lenders with a risk profile of trading firms’ positions without divulging anything about the firms’ trading strategies, has raised $8 million from Coinbase Ventures, HashKey Capital and Spartan Group as major participants.

X-Margin uses a secret-sharing technique called zero-knowledge proofs (ZKPs) to protect the privacy of trading firms while providing lenders a real-time picture of the borrower’s overall credit risk.

Bixin Ventures, Gemini, Kenetic Capital and Primitive Ventures also participated in the Series A funding round, X-Margin announced Monday. X-Margin also has the backing of such trading firms as CMS Holdings, Dunamis Trading, Kronos Research, MGNR, Pirata Capital and Wintermute Trading.

Cryptocurrency lending is big business, but in order to get loans, traders have to over-collateralize (typically, for every dollar of bitcoin they borrow, they have to post $1.20 as collateral for the safety of the loan). The result is that borrowers are suffering because they can’t get cheap loans, while lenders are at risk because they lack visibility.

Read more: Fireblocks, Celsius Back Zero-Knowledge Credit Scoring for Institutional Crypto Traders

X-Margin has facilitated more than $220 million of credit extended to institutions trading digital assets through direct lending and decentralized-finance (DeFi) lending platforms. The firm said in a press release that its risk engine monitors $2 billion of portfolio assets.

X-Margin CEO Darshan Vaidya said the platform lets lenders connect to creditworthy borrowers, monitor real-time risk and trigger margin calls if the value of a borrower’s net trading position falls outside agreed parameters.

“We will continue building out a platform where any pool of capital can access borrowers and easily operate a risk-managed lending operation,” Vaidya said in a statement.