New DeFi credit protocols raise millions
A new swathe of credit protocols is entering the DeFi zone. These are projects that use new methods to set credit ratings for borrowers. As The Defiant points out, “They aren’t as splashy as NFTs or GameFi, but these projects have quietly received a slew of funding in 2022 despite the abysmal performance in the crypto markets.” This could be an important move in the global unsecured lending market, which is valued at $11T.
The aim of these new protocols is to lay the foundation for a more robust DeFi marketplace. They also aim to enable more borrowers to receive loans from investors without having to post collateral.
Kanyi Maqubela, managing partner at Kindred Ventures, which has invested in Goldfinch, one of the new protocol platforms, told The Defiant: “It is the first sign of maturity in decentralized finance. The industry has, thus far, been insular: investment, lending, borrowing, deposit tools from crypto FOR crypto activities. This is powerful and has yielded some scale for a handful of protocols, but is still a minuscule fraction of the real opportunity.”
Charlotte Dodds, marketing manager at Maple Finance, also sees credit-based loans as unlocking higher levels of potential for crypto. “Undercollateralized lending is good because it’s the most efficient way to get capital. You don’t need to post collateral, which means you don’t need to lock up any funds to get that capital. So all of your money in the bank is yours.”
The list of these platforms is expanding. Masa Finance raised $3.5M in pre-seed funding in May to develop what they call a “decentralized credit score”. Rocifi, which offers credit scores and under-collateralized lending, raised $2.7M in a seed round in April. There are many more, including Maple Finance, Goldfinch, TrueFi, Cred Protocol, and all of them are exploring new ways to establish credit in crypto.