Unsecured loans have existed in TradFi for years as “unsecured loans”. But in DeFi, unsecured loans are loans where the borrower’s security is insufficient to cover the borrowed amount.
The following projects push the boundaries of unsecured lending.
Maple Finance exists on Ethereum and Solana. It is a loan marketplace that offers unsecured loans to institutional borrowers.
Maple enables the growth of institutions looking for on-chain capital. Maple enables lenders to generate sustainable returns by borrowing from diverse pools of blue chips.
In addition, the protocol has two governance tokens, $MPL and $xMPL, which allow token holders to participate in governance and share fees on revenues.
Clear pool funding
Clear Pool Finance is a decentralized marketplace for unsecured institutional capital. It gives leading institutions access to funds from a decentralized network of unsecured borrowers. In addition, Clear Pool exists on Ethereum and Polygon. Lenders can earn attractive interest from USDC and more LP rewards paid in their token.
Most importantly, anyone can borrow $CPOOL and claim rewards at any time.
Goldfinch Finance provides loans to institutions and companies that provide security both on-chain and off-chain. It uses the principle of “trust by consensus” to allocate capital to borrowers.
Investors are divided into funders and liquidity providers, both of which generate sustainable returns on their investments. Goldfinch also regularly issues its own token, $GFI, to funders.
Atlendis’ lending protocol allows institutions to borrow from a decentralized pool of lenders without collateral. An NFT is generated to represent the parameters of the agreement between the lender and the borrower.
Protocol borrowers can earn rewards even if they have not yet been matched with a borrower.
TrueFi offers unsecured loans to institutional investors. The protocol provides sustainable returns to the crypto lenders. TrueFi is built on Ethereum and OxPolygon. The lenders can use USDC, TUSD or USDT lent to the borrowers.
In return, lenders get high returns on TruFi’s capital and incentives.
Institutional lending typically requires collateral in the form of credit ratings, bank balances and proof of identity. In order to protect the lenders’ interests, the institutions have usually set a loan limit.
Until now, most financial instruments in TradFi have been reserved for the elite and big money, but DeFi now allows everyone to participate. In DeFi, retail investors can lend to leading capital markets and earn good returns on their stablecoins.
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Vincent Munene is a freelance writer and a huge blockchain enthusiast. Blockchain changed his life in terms of financial freedom and in return he wants to educate people and update them on everything related to blockchain. He is a biochemist by profession and also enjoys playing the piano.