Debifi is a marketplace for institutional-grade overcollateralized Bitcoin-backed lending. The immediate use case for the product is individuals and corporates seeking to borrow fiat against Bitcoin collateral. It is reasonable to expect significant and growing demand for such a service when thinking through the incentives on both sides. For borrowers, many Bitcoiners find their holdings become the bulk of their personal wealth when held for long enough, and while an excellent store of value over long periods, Bitcoin is not yet widely accepted as a means of payment. Hence such a loan provides fiat liquidity without a taxable event and with the possibility of eventual reclamation. For lenders, Bitcoin is “super collateral”, as founder and CEO Max Keidun puts it: unlike real estate, Bitcoin is liquid; unlike stocks, properly secured Bitcoin cannot be rehypothecated; unlike just about any financial instrument in traditional finance, Bitcoin is transparent and secure.

From an investor’s perspective, a marketplace is an attractive proposition to profit from the growth of this product. Debifi is neither lender nor borrower but rather a technology services provider, which gives two distinct benefits to the company’s growth prospects. First, Debifi is not constrained by access to capital as many pioneers in the space have been. The relevant challenge is to bootstrap both sides of the marketplace but there is a powerful network effect waiting to take over should this be catalyzed successfully. As the old saying goes, liquidity begets liquidity. Second, Debifi does not take the risks of the loans on its own balance sheet. Intriguing and attractive as the product category is, it seems set to evolve into a nearly perfectly competitive market in which lenders compete only on price, their own competitive advantage reducing to cost of capital on the funds they in turn can access. Aggregate volume will drive prices down. Debifi is a true “picks and shovels” play, for which aggregate volume drives returns up.

But the real excitement comes in thinking about the expanding utility such a marketplace could provide to borrowers as Bitcoin’s monetization advances. Beyond the initial product-market-fit of wealthy Bitcoiners’ financial planning, there are emerging industrial use cases and tighter integration with traditional finance on the horizon that will shape the company’s long-term prospects. Bitcoin miners are already using the product to manage their esoteric “inventory risk”. This need arises from miners being unavoidably exposed to the price of Bitcoin, but, of course, we expect companies of all sorts to increasingly adopt such a discretionary position via their treasuries. Any balance sheet with some amount of assets denominated in Bitcoin and some amount of liabilities denominated in fiat could in theory benefit from this product. Arguably the existence of the product as a tool of corporate finance makes a Bitcoin treasury more appealing in the first place.

Debifi is best conceived of as a tool for the better pricing of capital in and around Bitcoin. The opportunity is to become a key building block in maturing Bitcoin capital markets.

Debifi is a holding in Axiom Venture Fund I and Axiom GP Allen Farrington sits on the board