Fixed-rate crypto lending startup Notional Finance raised $10 million in a Series A led by Pantera Capital.

VC firms Parafi, 1Confirmation, Spartan Group, Nascent and Nima Capital also joined the Ethereum-based protocol’s equity round, said CEO Teddy Woodward. His company last raised cash in an October 2020 seed round. It will use this raise to build out the team ahead of version 2.0.

The round gives fresh runway to one of the larger fixed-rate lending firms in a decentralized finance (DeFi) landscape dominated by variable-rate programs. Woodward said Notional has executed $10 million in loans since emerging from stealth last autumn, dwarfing its closest fixed-rate competitor but falling far, far short of Aave’s $3 billion+ in variable loans. 

Woodward said Notional’s fixed rate terms are catering to a different clientele. It doesn’t exist “ “just to allow people to make leveraged bets on the price of different assets,” he said.

“Variable lending is great for trading and yield farming but there’s this entire new class of activity that it’s just not at all suited for,” he said. “When you introduce the ability to borrow and lend at fixed rates for long periods of time, all of a sudden you can do so much more than just trade and speculate.”

Woodward said roughly half of Notional’s users take out cash for “real-world” concerns. He cited one Australian customer who borrowed against his ether to pay down a mortgage. Woodward said this would not have been fiscally reasonable to execute on Aave or Compound: “The volatility is just too great.”

Still, Woodward said the other half of Notional loans go to “active DeFi users” pursuing crypto-specific pastimes such as yield farming.