The Tapio protocol announced on Monday that it has raised a total of $4 million in funding from Polychain, Hypersphere, and Arrington to usher in a unified liquidity standard for Polkadot.

According to the announcement, other investors in the seed round funding include Spartan, LongHash, 0xVentures, CMS, D1 Ventures, 11–11 DG Partners, Genblock, Valhalla, PAKA, and Double Peak.

Tapio Protocol is a Polkadot-based protocol of synthetic assets that aims to foster the efficiency of crowdsourcing derivatives and staking on the Polkadot blockchain.

“We built Tapio Protocol with one goal in mind, to make crowdsourcing and staking DOT derivatives more usable for all parachains and dApps on Polkadot,” Tapio Protocol said in the announcement.

Citing the announcement, the Tapio protocol expressed how the liquidity inefficiency caused by derivative tokens could challenge the Polkadot ecosystem given that the two main use cases for Polkadot’s native currency, DOT, are crowdlending and participation.

The Tapio Protocol team noted two significant issues with DOT derivatives on Polkadot parachains, stating that liquidity is siled on individual parachains and that each derivative format presents challenges to adoption.

These two broken liquidity issues bring down the Polkadot ecosystem by making it less efficient for users. Going forward, the Tapio protocol stated in the announcement that it aims to use the funds raised to resolve these issues.

The established protocol to unify DOT derivatives into a single asset has created tDOT. “We achieved this by unifying different formats of DOT derivatives into a single highly usable synthetic active, tDOT,” said Tapio Protocol.

tDOT is powered by the stable asset system, which is backed by a highly efficient and stable exchange liquidity pool comprised of native DOT and DOT derivatives. tDOT can now be found in Acala, a Polkadot DeFi hub.

Last month, Tether extended its USD-pegged stablecoin, USDT, on the Polkadot network. As reported by Blockchain.News, adding the Tether stablecoin to the Polkadot network is the right step to achieve the goal of expanding through decentralized ecosystems.

Image Source: TAPIO