![]() The liquidation and repayment of loans with off-chain assets and contracts may still take a long period. Lending that is under- or uncollateralized increases the chance of default. However, uncollateralized lending is a significant industry in DeFi, and the higher risk involved is reflected in the higher annual percentage yield (APY) on their loans compared to overcollateralized lenders like Aave and Compound. Oracles in combination with zero-knowledge proofs are already under development to mitigate the need for identity disclosure of borrowers to the uncollateralized lending platforms. It takes uncollateralized lending protocols, which may access trustworthy creditworthiness data to estimate risk profiles of borrowers without disclosing sensitive information on blockchains, to get over this restriction in DeFi. Although overcollateralized lending is safer for the lender, it is not as capital efficient and thus limits market expansion. This overcollateralization ensures that the collateral can be sold to make lenders whole in the event that a borrower defaults on their debt. While overcollateralized lending is the norm in DeFi, unsecured loans in traditional finance are sometimes partially undercollateralized or even completely uncollateralized. For instance, a borrower would be required to put up $10,000 in ETH as collateral for a $5,000 USDC loan. Lending markets in the DeFi space are often overcollateralized, meaning borrowers must deposit collateral in excess of the loan’s value. While lenders gain return on their otherwise idle cash, borrowers require fast access to working funds. The ability to lend and borrow assets is a cornerstone of any financial system. The first part of this mini series provides an overview on the current market situation of the underlying native ERC-20 protocol tokens, whereas a more detailed on-chain perspective on stakeholder token flows will be given in the following second part. capital adoption, token valuation, incentive impacts, and marketing dominance paint a clear picture of the absolute and relative market positionings. In this snapshot, comparisons of these protocols w.r.t. This significant growth potential was the motivation to create a snapshot overview of the current leading decentralized uncollateralized lending protocols. This implies a massive growth potential for the DeFi space in general and specifically for the decentralized lending sector. The US market for unsecured personal loans alone reached $210b in Q1 2023, exceeding the total value locked in decentralized finance (DeFi), which is just $61b. ![]() In this article the focus will be on a specific sector with a lot of potential as well. Our new thesis The Open Metaverse Under Attack – Fight Back introduced many encouraging growth paths for the Web3 space. ![]()
0 Comments
Leave a Reply. |