Bitcoin and cryptocurrencies have long been praised for their reliance on “trustless” blockchain technology, removing the need for third parties like banks and money transfer services to approve transactions—and now crypto companies are trying to co-opt Silicon Valley’s waning reputation as the most ethical industry.
Last year, search giant Google attracted media attention by removing its famous “Don’t be evil” line from its code of conduct, having earlier added the potentially ambiguous “Do the right thing” when Google reorganized under a new parent company, Alphabet, in 2015—a signal users and investors have taken to mean the likes of Google are giving up on their early ideals.
Now, Dharma Labs, a San Francisco-based bitcoin and blockchain financial technology startup, which is today announcing it’s raised $7 million in funding from a raft of investors including major U.S. bitcoin exchange Coinbase and led by Green Visor Capital, has boasted that “without a central point of failure,” its financial services “can’t be evil.”
Dharma Labs, which is planning to use the funding round to expand its margin loans for bitcoin and crypto traders and high-volume investors, argues its use of smart contracts and blockchain technology, a decentralised digital ledger, shared across different computer systems, means end-users will no longer need to place their trust in a single operator to provide them access, potentially removing corruption and unconscious bias from the system.
Margin loans allow investors to borrow money against shares or managed funds and can help people increase their returns but can also magnify losses.
“Digital currencies will one day power financial services that are as competitive, user-friendly, and globally accessible as the best internet products we enjoy today,” said Nadav Hollander, founder and chief executive of Dharma Labs. “In the same way that Uber made it both easy and cheap to get a ride from anywhere in the world, we believe Dharma Lever will make accessing margin lending easy and cheap for anyone in the world.”
“Smart contracts have massive implications on financial services because they remove the ability for a single entity to deny user’s service based on their economic status or where they live,” the company said in a statement announcing the funding round.
Dharma argues that today’s credit infrastructure is “fractured and opaque,” compared to global debt markets, which “allocate trillions of dollars in capital.”
Google added “Don’t be evil” into its code of conduct back in 2001 as the young company sought to define its corporate values. In claiming it “Can’t be evil”, Dharma is seeking to avoid the pitfalls Google has fallen into, becoming the faceless corporate giant it once hoped make redundant.
Dharma’s claim it “Can’t be evil” is based on the belief that blockchains eliminate trust. However, they more accurately minimize the amount of trust required from any single actor in the system.
Blockchain technology has been touted as a panacea for everything from cash, though its original iteration bitcoin, to supply chains and shipping. However, doubt has crept into the sector as blockchain projects stall or fail to live up to their lofty ambitions.
Many in the bitcoin and cryptocurrency sector have been attracted to bitcoin and cryptocurrencies due to negative experiences with the traditional financial services industry and its these people that will lead any move towards financial services on the blockchain.
Crypto-assets are gaining utility by being used as a form of collateral in secured lending contracts, according to Dharma. Genesis Capital Trading originated over $500 million in crypto-secured loans in the second and third quarters of 2018, and BlockFi, which offers loans collateralized by crypto-assets, raised a $50million debt facility to provide secured loans to crypto-asset holders.
According to Mike Walsh, general partner at Green Visor Capital, digital economies will require lending infrastructure if they want to scale.
“Dharma has taken the most disruptive facets of blockchain technology and applied them to a financial services sector that is desperate for innovation. In an industry where economies are natively digital, we believe Dharma’s technology will become a necessary piece of infrastructure for future growth,” said Walsh.