Rails Secures $14 Million Funding Led by Kraken for Hybrid Exchange

Cryptocurrency exchange platform Rails has successfully secured $14 million in funding, with significant contributions from Kraken. This latest investment round brings the company's total funding to $20 million, following an earlier $6 million equity round completed in March. The round also saw participation from CMCC Global, Slow Ventures, Round13 Capital, and Quantstamp.

Rails is set to offer a hybrid model that merges the execution speed of centralized platforms with the asset control and transparency of on-chain custody. The platform employs a centralized matching engine to ensure high performance while settling trades on-chain through cryptographic techniques such as zero-knowledge proofs and Merkle trees. These methods allow for the verification of account balances and trades without revealing user data, ensuring both privacy and tamper-proof transparency on-chain.

The on-chain components are designed to give users greater control over their assets without sacrificing execution speed. This approach, combined with Rails' market maker structure that utilizes transparent dedicated capital, implements traditional finance safeguards while maintaining the benefits of decentralized asset control. Sam Lessin, General Partner at Slow Ventures, noted that Rails is the first exchange he has seen where neither security nor speed is compromised.

Rails will initially support perpetual futures contracts collateralized with stablecoins, rather than spot trading. The exchange does not currently plan to expand to assets outside those supported on Ink, a layer-2 blockchain developed by Kraken that will exclusively host the platform. Rails was founded in 2023 by the team behind BlockEQ, a crypto wallet acquired by Canadian exchange Coinsquare in 2018.

The funding and launch of Rails' trading platform represent a significant development in the cryptocurrency exchange landscape. By combining the strengths of centralized and decentralized platforms, Rails aims to provide a more secure and transparent trading experience for users. The participation of Kraken and other prominent investors further underscores the potential of Rails' hybrid model and its ability to address long-standing challenges in the industry.