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Cycles began when Ethan Buchman came across this paper on mutual credit. For Ethan, it was as if someone had turned the light on. The paper made the point that the clearing that banks had guarded for centuries did not have to stay private, and that the same mechanism could be opened up and extended to businesses and individuals. Instead of settling every obligation in full, one payment at a time, everyone should net their obligations against one another, cancelling out everything that offsets, so only the remainder ever has to move. The idea was brilliantly simple, almost obvious, but it had never been possible to do this openly, without a central party sitting in the middle of everyone’s books. Blockchains changed that, and advances like zero-knowledge proofs meant obligations could be netted across strangers without anyone having to reveal their full position. These were exactly the kind of problem Ethan had spent years working on.
Ethan hired the paper’s authors at his company Informal Systems (more on that below), and the project was incubated at Informal before spinning out into its own independent company, officially becoming Cycles, raising $8.7M and pulling together a small team of top engineers to build the first open clearing network for on-chain finance.
Prior to Cycles, Ethan Buchman co-founded Cosmos, a technology stack that now powers hundreds of blockchains. He led the development of the Tendermint consensus engine and was a major contributor to the IBC protocol, which enables Cosmos blockchains to communicate. He then served as Technical Director of the Interchain Foundation, before co-founding and leading Informal Systems, spending much of the following decade building Cosmos with a focus on correctness and formal verification.
Cycles applies that same rigor to money. Most of the Cycles team came from Informal Systems. They are engineers and researchers who spent years building and stewarding core Cosmos infrastructure, and who bring a rare depth in distributed systems, formal verification, and protocol design.
Cycles is building an open, privacy-preserving protocol for multi-party clearing. It maps obligations between participants, finds where they cancel each other out, and settles only the difference. Clearing obligations dramatically reduces the capital that has to move, which means less locked-up cash, less friction, and less counterparty risk than traditional bilateral settlement.
The mission is to clear the most debt for the most people with the least money.
On top of the Cycles protocol, we’re starting out by building two products:
Multi-party clearing for crypto-native financial institutions. Trading firms net their obligations privately across the network, cutting liquidity needs and counterparty exposure without moving assets, posting collateral, or changing who owes whom.
Explore Cycles PrimeStablecoin payments and invoicing for small and medium businesses. Companies send and receive payments privately, raise financing against pending receivables, and earn yield on idle balances, all from one app.
Explore Cycles PayAs the protocol grows and matures, we expect to see many more types of apps built on it.
