Hedgehog Raises $1.5 Million in Pre-Seed Round
Hedgehog, a protocol that aims to tackle the issue of fluctuating crypto transaction fees, has successfully raised $1.5 million in a pre-seed round. The funding round saw participation from notable venture capital firms such as Marshland Capital, Tenzor Capital, Prometeus Ventures, 3Commas Capital, and Nothing Research. In addition to these firms, angel investors including Vasiliy Shapovalov (co-founder of Lido Finance), Banteg (a pseudonymous developer at Yearn Finance), and ivangbi (a pseudonymous core contributor to Gearbox) also contributed to the round.
The main objective of Hedgehog is to address the problem of highly volatile crypto transaction fees. These fees can be incredibly expensive for protocols and businesses to manage. While Ethereum transaction fees have been as low as one dollar on certain occasions, they can skyrocket during periods of high demand. Currently, fees stand at $25 for a simple transaction and over $100 for more complex ones.
Creating an Asset That Reflects Transaction Fee Prices
Hedgehog’s core mission is to develop an asset that accurately reflects the current transaction fee prices on the Ethereum network. Specifically, this asset will mirror the moving average price over the last 50 blocks in the blockchain. Once this asset is established, individuals will have the ability to long or short it as a hedge against future transaction fee prices.
How Does Hedgehog Work?
The concept behind Hedgehog is similar to that of DAI, a decentralized stablecoin pegged to the US dollar. Here’s how Hedgehog operates:
- Hedgehog employs overcollateralized vaults to create a derivative token called BaseFee.
- BaseFee is designed to mirror the average transaction fee price, using an arbitrage mechanism.
- The protocol ensures that the value of the crypto locked in the vault is significantly higher than the value of the created BaseFee tokens.
- Similar to DAI, Hedgehog implements a minting and redemption process that creates arbitrage opportunities to maintain the asset’s value tied to the average transaction fee price.
While Hedgehog currently focuses on mirroring transaction fee prices, the protocol can be expanded to create other on-chain derivatives as long as there is sufficient demand.
Hot Take: Addressing Fluctuating Crypto Transaction Fees
Hedgehog has successfully raised $1.5 million in a pre-seed funding round, attracting participation from various venture capital firms and angel investors. The protocol aims to tackle the issue of wildly fluctuating crypto transaction fees by creating an asset that mirrors current transaction fee prices on Ethereum. By utilizing overcollateralized vaults and an arbitrage mechanism, Hedgehog’s derivative token, BaseFee, is designed to maintain its value tied to the average transaction fee price. This innovative solution offers individuals the opportunity to hedge against future transaction fee prices. With its successful funding round, Hedgehog is poised to make significant strides in addressing one of the key challenges faced by protocols and businesses operating in the crypto space.
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