Porter Finance Has a New Idea To Help DAOs Grow: ‘DeFi Bonds’

Blockworks Exclusive: The Ethereum dApp will let DAOs raise funds akin to issuing fixed-rate corporate debt


Meyer fleshed out the idea for Porter Finance on a climb of Mount Kilimanjaro in Tanzania in September 2021 | Source: Shutterstock


key takeaways

  • Porter Finance has closed a $5 million seed funding round for its DAO credit marketplace
  • Included in the round were ParaFi Capital, Dragonfly Capital, Nascent Ventures, Buckley Ventures, Robert Leshner, Kain Warwick, Tyler Ward, Joey Santoro and Sam Kazemian

When a DAO with a treasury full of tokens wants to raise cash for operations, its main option currently is to sell tokens, either through private sales or on the secondary market. Porter Finance plans to give these DAOs (decentralized autonomous organizations) a new strategic tool that’s more like issuing corporate bonds.

The platform will let DAOs borrow stablecoins at fixed rates, using their project’s tokens as collateral, with no liquidation risk. This is effectively a zero-coupon bond sold to investors seeking a fixed income, Porter Finance’s founder Jordan Meyer told Blockworks.

“No one has built out a DAO-friendly solution for borrowing yet, until now,” Meyer said.

The platform will enable DAOs to deposit collateral from their treasury, create a “DeFi bond” offering, at a discount to investors, and then let them repay the loan at the maturity date with interest set by the market.

“We are allowing the DAOs to choose how they want to structure [the offering]. The DAO can choose to allow-list the offering, and only allow KYCed or accredited investors or, if they want, they can make a public offering — it’s up to them,” Meyer added.

The platform’s front end will initially be designed to exclude users from the US or any sanctioned countries, due to regulatory uncertainty.

There are some important differences compared to bonds in traditional finance, namely the risk profile. DAO-issued bonds will not be senior in any corporate capital stack, nor are the contracts open to enforcement in bankruptcy, which is not practical for loans to DAOs. Instead, they are secured by the collateral in the Porter Finance smart contracts.

Lenders take on some directional price risk of the underlying collateral asset, but in exchange they receive an option premium set by the market at the time of the offering.

“That option premium — and that discount — gets priced during the auction. Market participants who are bidding, they decide what the implied volatility is for them, what the option should be priced at, essentially the market risk they are taking,” Meyer explained.

For the DAO borrower, the system provides a mechanism to finance working capital for operations without putting downward pressure on their treasury token price, losing governance rights or risking liquidation in a money-market fund like Rari Capital Fuse pools — now part of the Tribe DAO.

A fortuitous climb

Meyer fleshed out the idea for Porter Finance on a climb of Mount Kilimanjaro in Tanzania in September 2021.

“You have 15 pounds on your back, but there are these other people who are helping you called porters…you would never make it up the mountain, in this 7-day trek, if you didn’t have the porters to carry the bags for you, or to help you up — and that was really impactful on me,” recalled Meyer, who named the protocol after these hardworking enablers.

The original logo of Porter Finance

“We want to be able to empower DAOs to reach their peaks, their summits and their financial goals.”

The original logo of the platform was a green backpack, inspired by the packs porters carry, Meyer said, adding it was unfortunately mistaken for a robot. Its branding has since been revised in advance of a planned June launch on the Ethereum mainnet, following smart contract audits by Secureum and Spearbit.

“We’ll go where the DAO treasuries are, and right now that’s Ethereum,” Meyer said.

A “massive market”

Porter Finance has closed a $5 million seed round with investments from ParaFi Capital, Dragonfly Capital, Nascent Ventures, Buckley Ventures, Robert Leshner, Kain Warwick, Tyler Ward, Joey Santoro and Sam Kazemian.

Nascent’s co-founder Dan Elitzer told Blockworks he jumped at the chance to back Porter after discussing a similar concept with Ben Forman, ParaFi’s founder and managing partner.

“Corporate debt is just an absolute massive market. And companies, if they have cash needs, they don’t just go and sell more shares…debt-based financing just makes a lot more sense — effectively cheaper capital,” Elitzer said.

“This is an important additional tool that DAOs should have in their toolbox,” he said.

Don’t miss the next big story – join our free daily newsletter.


Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

MON - WED, MARCH 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience:  Attend expert-led panel discussions and fireside chats  Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts   Grow your network […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Frax report cover.jpg


Frax saw continued development in its frxETH liquid staking derivative and Fraxlend money market throughout 2023. Frax V3 introduces an RWA strategy to drive utility to the protocol's cornerstone product, the FRAX stablecoin.


Commissioner Peirce would have done things differently if she could when it comes to her agency’s crypto enforcement actions


MicroStrategy discloses the purchase of 16,000 bitcoin throughout November


Digital asset firms face potential new regulatory landscape under Treasury’s proposed authority expansion


Uniswap Labs will be providing trading APIs to Talos investors through Fireblocks


DYDX supply will climb by up to 80% after the Friday unlock, but a couple factors make a massive sell-off appear unlikely


Switzerland-based Pando Asset, which has crypto products trading on the SIX Swiss Exchange, now looks to the US