Sense Finance Raises $5.2m to add a new dimension to DeFi

2022.03.10 Edit: Zeros & Claims rebranded to Principal Tokens (PTs) & Yield Tokens (YTs) https://bit.ly/3t2EcJ2

Drawing on a combined six years of experience at the Maker Foundation, we’ve been tinkering with smart contract primitives and are thrilled to announce our seed fundraise and share plans for Sense V1 — one of the next pieces of DeFi’s infrastructure.

The financing was led by Dragonfly, with participation from Bain Capital Ventures, Nascent, Variant, Robot Ventures, and theLAO, among others.

In addition, Sense’s advisors have had a big hand in early iterations and continue to play a key role in our development:

• Steven Becker | President & COO of Maker Foundation
• Dillon Chen | Co-founder & CEO of Commonwealth Labs
• Kurt Barry | Core Protocol Engineer at MakerDAO
• Tom Walton-Pocock | Research Partner at Fabric Ventures and ex Co-Founder & CEO of Aztec
• Ben Myers | Systematic Commodity Trader at Arrow Resources
• Freddie Farmer | Investor & ex-Head of DeFi at Wintermute

A little background

Sense was spun out from a side project started in early 2020 called “Split,” which allowed users to hedge interest rate volatility in their Maker Vaults using the Dai Savings Rate. Although the mechanism has changed, the core value proposition remains: enabling a dimension of self-directed risk management with fixed rates and future yield trading.

But the value extends beyond Maker, so Sense will interface with and enhance all existing yield-generating activities, such as lending, exchange, staking, and protocol dividends.

Over the past year, we were thrilled to see demand for various DeFi fixed-rate protocols, which confirmed our thesis that users want fixed rates and better tools for market expression. The large demand of today will be but a blip of what can be unlocked by Sense and others in the years that follow. We’re excited to pave that path forward.

Our Mission

Our mission is to build a more equitable financial system that serves everyone, promoting self-sovereignty and individual choice.

Today, most yield-bearing assets in DeFi are one-dimensional. They accrue yield at some variable rate, delivering cash flows in real-time. There’s no easy way to earn a fixed rate or trade against future yields on these assets. The existing solutions are prone to protocol insolvency, enforce capital lock-ups, or fail to serve the long tail of yield-bearing assets. In contrast, Sense offers a simple approach to adding a time dimension to existing yield-bearing assets, allowing users to empower themselves and choose a position that matches their risk tolerance.

What is Sense?

At its core, Sense Protocol introduces a practical design that allows users to decompose a yield-bearing asset into its principal and yield components and package them behind two maturing assets, a Principal Token (PT), and a Yield Token (YT). With PTs and YTs, users can safely earn/borrow at a fixed rate and trade against future yields without the risk of liquidation and capital lock-ups. Sense is permissive, allowing anyone to create new future yield markets on existing yield-bearing assets.

Because Sense permits multiple maturities, each set of PTs and YTs, or series, will trade in their own markets, allowing the community to create yield curves for each yield-bearing asset.

The result is a new layer of interconnected yield curves, offering avenues for yield management and risk displacement across the universe of yields in DeFi.

Our Investors

Tom Schmidt, General Partner at Dragonfly. Previously product @ 0x, Facebook, & Instagram.

DeFi is rapidly evolving, from simple money markets and peer-to-peer swaps to sophisticated derivatives and beyond. But if DeFi is ever going to take on traditional financial institutions, there will need to be a way for users to hedge out underlying volatility. Sense is that solution, allowing people to create infinite derivatives on infinite markets in a way that is truly permissionless. We’re excited to be backing Kenton and Josh, two DeFi veterans, who have spent the past two years thinking deeply about interest rates and lending while building Maker.

Dan Elitzer, co-founder at Nascent. Previously co-founded IDEO CoLab Ventures & MIT Bitcoin Club.

Amidst the rapid growth in new DeFi protocols, there is a shortage of teams who have the patience and ability to develop robust primitives that both users and developers can rely on. We at Nascent are excited to support the Sense team and look forward to using their tools to more precisely manage our lending and borrowing positions.

What’s next for Sense

As we develop Sense V1, we’ll release more content on its value proposition and research/analysis around fixed-income in DeFi. To learn more, visit our website, follow us on twitter, or join our discord.

We are Hiring!

The journey has just begun, and the road ahead is full of challenges, so we are on the lookout for great talent. Notably we’re looking for solidity and front-end devs, but if you’re a builder of any kind and interested in setting the standard for DeFi infrastructure, swing by our Hiring page.