Institutional Lending is gradually becoming the fastest-growing segment in DeFi. Best of all, you can earn attractive returns on your stables lending to these institutions.
Undercollateralized lending is not a new concept. It has been existing in Traditional finance for years, but with the term "unsecured loans."
The only difference with DeFi, it is very much accessible and lucrative for retail investors. Although not without some risks.
Undercollateralized Loans in DeFi
Undercollaterized loans in DeFi are loans in which the borrowers' collaterals are insufficient to cover the amount taken.
When it comes to institutional lending, the collaterals are usually in the form of credit scores, proof of identity, bank balances, etc.
Most importantly, these institutions are correctly KYC'ed and given a threshold for borrowing to protect the lenders' interest. However, some inherent risks are still involved, which are laid on the terms of these platforms.
Let us look at some of the most exciting projects pushing the boundaries of undercollateralized lending.
1. Maple Finance
Maple is a credit marketplace providing undercollateralized lending for institutional borrowers and yield opportunities for lenders. It is built on Ethereum and Solana. Additionally, Maple is enabling growth for institutions seeking on-chain capital.
With Maple, Lenders get a chance to earn sustainable yields by borrowing from diversified pools of blue chips. Also, the protocol has two governance tokens (MPL and xMPL), which enables token holders to partake in governance, share in fee revenue, etc.
2. Clearpool Finance
Built on Ethereum and Polygon blockchains, Clearpool is a decentralized marketplace for unsecured institutional capital. With Clearpool, leading institutions can access funds from a decentralized network of borrowers without collaterals.
Lenders can earn attractive interest rates on USDC, and additional LP rewards are paid in their native token, $CPOOL. The best part is that anybody can lend and claim $CPOOL rewards anytime.
3. Goldfinch Finance
Goldfinch is a credit protocol lending to institutions and businesses that provide collateral both on-chain and off-chain.
Additionally, it uses the principle of "trust through consensus" to allocate capital to borrowing institutions.
Investors are classified into backers and liquidity providers, both of which earn sustainable yields on their investments. The protocol also distributes its native token - GFI, to backers regularly.
4. Atlendis Protocol
Atlendis Protocol allows corporate entities to borrow credit from a decentralized pool of lenders without collateral. Also, an NFT is generated to represent the parameters of the agreement between the lender and borrower.
Additionally, lenders on Atlendis earn rewards even when not matched up with a borrower.
5. TrueFi
TrueFi is an uncollateralized marketplace that provides loans to institutional investors and sustainable rates of return to crypto lenders. Built on Ethereum and Polygon blockchains, TrueFi is redefining institutional borrowings.
A lender can stake USDC, USDT, or TUSD into TrueFi pools, which are lent to borrowers. And in return, earn high yields on the capital, coupled with $TRU incentives.
We have seen what DeFi can do through Ethereum. Just imagine the levels it can go with Bitcoin integration.
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