Superteam Demo Day: Xitadel (Ryot Seo)

What if Web3 projects could access capital without selling their tokens at massive discounts or creating devastating sell pressure? A new Solana-based protocol called Citadel is tackling this exact problem, promising to bring traditional debt financing mechanisms to the crypto-native world.

Summary

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Ryan Seo from Citadel took the stage at Breakpoint 2025's Superteam Demo Day to present a compelling solution to one of DeFi's most overlooked problems: the complete absence of debt financing for Web3 projects. In traditional finance, founders and businesses routinely access capital by borrowing against their assets—a practice that preserves equity and offers more favorable terms than selling ownership stakes. Yet in the Web3 space, this fundamental financial tool simply doesn't exist, forcing projects into equity sales that come with significant drawbacks.

The Citadel protocol introduces an over-collateralized fixed yield system that functions similarly to corporate bonds in traditional finance. Projects can deposit their idle tokens as collateral and borrow stablecoins against them, maintaining their equity positions while accessing the liquidity they need. This represents a paradigm shift for how crypto-native organizations manage their treasuries and fund operations.

Perhaps most ambitiously, Citadel envisions this technology extending far beyond Web3-native projects. The team sees DAOs, decentralized autonomous trusts (DATs), and real-world asset (RWA) holders as potential users. The protocol could theoretically enable someone with tokenized real estate in Nigeria to borrow capital from lenders in London, demonstrating the borderless potential of on-chain debt markets.

Key Points:

The Web3 Debt Financing Gap

One of the most striking revelations from Seo's presentation is that Web3 projects currently have no practical way to access debt financing—a statement that sounds almost unbelievable given how fundamental debt is to traditional business operations. In traditional finance, when founders need capital, they approach banks and use their assets as collateral to secure loans. This is widely considered the most capital-efficient method of raising funds.

The absence of this option in crypto forces projects into a corner. Their only real choice is to sell equity (typically in the form of tokens), which creates a cascade of negative effects that can significantly harm both the project and its existing token holders. This structural limitation has been quietly undermining the efficiency of capital allocation across the entire Web3 ecosystem.

The Problems with Token Sales

Selling tokens to raise capital introduces several serious problems that Seo outlined clearly. First, token sales typically come with substantial discounts—often around 50%—meaning projects effectively give away half their value just to access liquidity. This represents an enormous hidden cost that eats into a project's long-term potential.

Beyond the immediate discount, token sales create direct selling pressure in the market, which can trigger price declines that affect all existing holders. Even worse, some sophisticated buyers use these opportunities to create delta-neutral positions by shorting the token simultaneously with their purchase. While this strategy protects the buyer's downside, it amplifies selling pressure and works directly against the project's interests.

How Citadel's Over-Collateralized System Works

Citadel's solution centers on an over-collateralized fixed yield mechanism that mirrors how corporate bonds function in traditional markets. The concept is straightforward: projects deposit their idle tokens as collateral and receive liquid USDC loans in return. The collateralization ratio is substantial—Seo used the example of a project depositing $300 million in tokens to borrow $100 million, suggesting a 3:1 collateralization requirement.

The debt instruments themselves are tradable, creating a secondary market similar to corporate bonds. Seo illustrated this with a simple example: a debt position starting at $1 would be redeemable for $1.13 at maturity with a 13% interest rate. This tradability adds liquidity and flexibility for both borrowers and lenders, potentially attracting a broader range of participants to the market.

Expansion Beyond Web3 Projects

While Web3 projects represent the initial target market, Citadel's vision extends much further. Seo characterized current Web3 projects as just "a tiny little fraction" of the entities that hold significant amounts of idle tokens or tokenizable assets. The protocol sees potential applications across DAOs, decentralized autonomous trusts, and the rapidly growing real-world asset space.

The RWA application is particularly compelling. Seo posed a provocative question: what's the point of tokenizing a building if you can't do anything with it afterward? Citadel's answer is to enable owners of tokenized real estate or other assets to borrow against them, regardless of geographic boundaries. This could unlock truly global, permissionless debt markets where physical location becomes irrelevant to accessing capital.

Facts + Figures

• Token sales in Web3 typically come with discounts of approximately 50%

• Citadel uses over-collateralization, with an example showing $300 million in collateral for $100 million in borrowing

• The protocol functions like a corporate bond model with tradable debt instruments

• Example yield structure: $1 initial position returning $1.13 at maturity with 13% interest

• DevNet is already live and available for testing

• The team has completed a builders funding round

• Target use cases include Web3 projects, DAOs, DATs, and RWA holders

• The protocol enables borrowing in liquid USDC against token collateral

Top quotes

• "Website projects can't access debt financing. This is not a joke."

• "Selling equity is the only option that you have in a web3 market and that is creating a lot of different problems."

• "Some of those buyers are going to short your token because they want to create a delta neutral position. Obviously, good for them, not good for you."

• "The web3 project is just a tiny little fraction of the institutions or any entities that has a bunch of tokens in idle doing nothing."

• "What are you going to do to tokenize your building? Nothing. So, tokenize your building, borrow money against it."

• "If you're in Nigeria, have a building, you can borrow money in London. That's what we are trying to do."

Questions Answered

Why can't Web3 projects access debt financing today?

Traditional debt financing relies on established banking relationships, credit histories, and legal frameworks that don't translate well to the crypto space. Banks don't accept tokens as collateral, and there hasn't been infrastructure built on-chain to replicate these functions. This leaves projects with limited options—primarily selling tokens—when they need to raise capital. The gap exists because DeFi has focused heavily on trading and lending for individuals rather than building corporate treasury solutions.

What's wrong with selling tokens to raise capital?

Selling tokens creates multiple problems that compound to harm projects. First, buyers typically demand substantial discounts—around 50%—which immediately erodes the project's value. Second, these sales create direct selling pressure in the market as buyers eventually liquidate their positions. Third, sophisticated investors often hedge their purchases by shorting the token, amplifying downward pressure. Finally, selling equity dilutes existing holders and reduces the founding team's control and upside.

How does Citadel's debt financing mechanism work?

Citadel allows projects to deposit their tokens as collateral and borrow stablecoins against them. The system is over-collateralized—in the example given, a project would need to deposit $300 million in tokens to borrow $100 million. The resulting debt position is tradable like a corporate bond, starting at $1 and growing to include interest (such as $1.13 with 13% interest) by maturity. At maturity, the debt can be redeemed, and the collateral returned.

Who can benefit from on-chain debt financing beyond crypto projects?

Citadel envisions applications far beyond native Web3 projects. DAOs sitting on substantial treasuries could borrow against their holdings to fund development or operations. Holders of tokenized real-world assets—such as real estate—could use their properties as collateral for loans. This creates genuinely borderless capital markets where someone owning a tokenized building in Nigeria could access liquidity from lenders anywhere in the world, removing geographic barriers from debt markets.

What stage of development is Citadel currently in?

Citadel has its DevNet already live and available for testing. The team has completed a builders funding round and is actively developing the protocol. Interested users can test the current implementation on DevNet, and the team was present at Breakpoint 2025 to discuss the project and answer questions about their roadmap and technical implementation.