Tim Draper joins the $3.5 million Bitcoin loan investment

Tim Draper has led a $3.5 million seed funding round at Zest Protocol, a Bitcoin lending startup.

This move is a major milestone in making decentralized finance (DeFi) accessible to the Bitcoin network, with contributions from industry giants like Binance Labs.

3.5 million dollars to Bitcoin lending venture

Building on the Stacks blockchain, the Zest protocol aims to revolutionize Bitcoin lending. It wants to allow BTC holders to use their assets in on-chain lending markets without intermediaries. The startup is using the upcoming updates of Stacks Nakamoto and sBTC.

Tycho Onash, founder of the Zest protocol, highlighted the limitations of Bitcoin's Layer 1 technology in supporting basic DeFi operations such as liquid pools.

“Bitcoin L2s like Stacks are poised to play a key role in unlocking Bitcoin DeFi. Unlike Ethereum, creating basic DeFi primitives like liquidity pools is not possible on Bitcoin L1. The Stacks sBTC upgrade is set to be a watershed moment for Bitcoin DeFi, which is what it was designed for from the start,” said Onash.

The platform's sBTC peg-in-the-wire format allows users to provide their lending activities through direct Bitcoin transactions. As the Zest protocol prepares for the launch of sBTC, the infrastructure is already running on the Stacks mainnet, introducing the first currency market for Stacks-based assets.

The Zest protocol was incorporated by Loyalty Machines, co-founded by Stax creator Munib Ali. Additionally, he was instrumental in developing the Stax Nakamoto Reform.

“I don't just want to hold BTC – I want to use it! I've made many attempts to deploy BTC productively, but it hasn't been easy. I'm excited to see Tim Draper and the team at Zest Protocol do this, and I look forward to using the product once BTC deposits are open.”

Read more: How to choose a cryptocurrency lending platform

Beyond technology, Binance Labs' involvement shows strong support for Zest's approach to Bitcoin lending. Current solutions often depend on central parties, introducing fees and reducing economic viability for consumers. The Zest model promises transparency and user control, eliminating unnecessary intermediaries.

This investment is part of a broader renaissance in crypto lending initiatives, confirmed by recent funding activities in the sector. Draper's continued investment in blockchain, Bitcoin-based financial services, and Quantum Economics CEO Matty Greenspan highlight the potential such market sector can offer.

“Blockchain-based lending solutions have the potential to be more open and transparent than what you typically find in traditional finance. But, at this point, with DeFi still in its infancy, these types of investments can be very risky, especially for those who don't know how to do the research. For what it's worth, Tim Draper is very “He's a smart guy and I think he probably did his homework before going ahead with this kind of investment,” Greenspan told BinCrypto.