DeFi

Why these $2.5 billion crypto lenders are trying to get unsecured loans again – DL News

Published

8 months ago

3 June, 2024

Why these $2.5 billion crypto lenders are trying to get unsecured loans again – DL News

Cicada Markets and TrueFi launch unsecured loans on Arbitrum.
This niche has led to some of the largest and costliest bankruptcies in recent years.
There is little to no standardization in how crypto companies are evaluated for underwriting.

TrueFi, a lending protocol, is partnering with risk managers Cicada Markets to bring what has been a cornerstone of traditional finance – borrowing more with less – to crypto.

Undercollateralized lending is a tough business, marred by catastrophic bankruptcies in recent years.

The multibillion-dollar collapse of centralized lenders Celsius, BlockFi, and Genesis has had ripples across the industry, defining the crypto winter of 2022 and 2023. Decentralized lenders have also had their share of carnage.

Recent attempts at unsecured lending on DeFi protocols like Goldfinch resulted in defaults worth millions of dollars.

Despite previous catastrophic failures, TrueFi and Cicada are trying again.

After all, this is a huge opportunity.

A 2023 report of Allied Market Research predicts that the global unsecured commercial loan market across all sectors will reach $12.5 trillion by 2031.

“A lot of the negative stigma comes from a lack of education on the topic,” said Ryan Rodenbaugh, CEO and co-founder of Wallfacer Labs, a major contributor to the TrueFi protocol. DL News.

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Sure, loans exist in the crypto industry, but the majority of loans require borrowers to provide more collateral than they can borrow. In the permissionless world of DeFi, this is the only way to minimize the risk of your counterparty running away with the money.

For unsecured loans, the only guarantee of repayment is the reliability and track record of the borrower.

It all depends on a company’s ability to accurately assess risk. In this case, that means TrueFi and Cicada.

“Since loans are issued based on on-chain and off-chain balance sheets, there needs to be a centralized underwriter who needs to analyze all this data and issue an opinion,” said Ashwath Balakrishnan, director at Delphi Creative. DL News.

Take things slowly

Both companies will provide lines of credit to crypto-native trading firms, a demographic notoriously unable to take out loans from traditional banks that cannot bear the risk.

But for an industry with a disastrous history of undersecured lending, attracting businesses is a challenge. When DL News When asked how they were going to differentiate themselves from previous disasters, Rodenbaugh responded by slowing things down.

“Underwriting for risk management and slow growth works well,” he said, referring to the process by which entities calculate and assume the financial risk of loans.

The new platform is not their first foray into lending. TrueFi already runs a small, unsecured network loan market on Ethereum worth almost $24 million.

Cicada also took out unsecured loans from DeFi lender Maple Finance, a company not without its failures.

Lenders on Maple suffered a major blow in December 2022 when borrower Orthogonal Trading by default on eight loans totaling $36 million.

A few months ago, crypto hedge fund Invictus Capital and crypto investment firm Blockwater Technologies failed to repay loans on TrueFi totaling $4.4 million.

But Rodenbaugh said the TrueFi platform, which has lent $1.7 billion over its lifetime across more than 150 loans, has a default rate of less than 1%. Similarly, Cicada Markets, which has underwritten more than $850 million in loans since 2021, has a default rate of 1.2%.

“Both protocols suffered losses, as you would expect for any form of credit, but neither of our protocols suffered the catastrophic losses seen by companies like BlockFi, Genesis, Celsius, etc.,” a Rodenbaugh said.

Default rates for TrueFi and Cicada are comparable to traditional financial markets. According to the Federal Reserve Bank of St. Louis, the average delinquency rate on business loans across all commercial banks was 1.13% in the first quarter of 2024.

“The lack of standardization means there is no way to confirm with certainty that the data is legitimate.”

—Ashwath Balakrishnan, Head of Delphi Creative

Sefton Kincaid, founder of Cicada Markets, said DL News The low default rates are because both companies were very selective about who they lent to and followed a strict due diligence process.

He said the two men reviewed potential borrowers’ performance histories over several trading cycles before agreeing to underwrite loans.

Yet that might not be enough. Compared to traditional markets, there is little to no standardization in how crypto companies are valued for underwriting.

“The lack of standardization means there is no way to definitively confirm that the data is legitimate,” Balakrishnan said. DL News. “As a lender, you need to be sure that the underwriter is doing their job properly. »

Deployment on Arbitrum

The pair built their new lending marketplace on Ethereum’s layer 2 Arbitrum.

Rodenbaugh said TrueFi and Cicada chose Arbitrum over other blockchains because it is Ethereum’s layer 2 with the most deposits and also the most advanced in terms of decentralization.

The network’s foundation also agreed to provide a token ARB grant to encourage interest, but it has not publicly disclosed the amount of the grant.

The question now is whether TrueFi and Cicada can attract enough quality borrowers.

Cicada’s Kincaid said his company has identified more than 20 borrowers – mostly commercial companies – seeking to take out lines of credit worth more than $300 million at an interest rate of 13 to 15 %.

If the two men courted all of these borrowers, that would make the new protocol the the fourth largest Real-world asset DeFi protocol as tracked by DefiLlama.

Tim Craig and Liam Kelly are DeFi correspondents at DL News. Do you have any advice? Send them by email to tim@dlnews.com And liam@dlnews.com.

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DeFi

If You Missed BONK and PEPE This Year, This Viral New Crypto Might Be Your Salvation

Published

6 months ago

29 July, 2024

CoinFlix Staff

If You Missed BONK and PEPE This Year, This Viral New Crypto Might Be Your Salvation

Bonk and Pepe appear set to net new investors 10x to 100x returns over the next 12 months. However, cryptocurrencies in the DeFi play-to-earn gaming sector could offer even greater returns. As August approaches, Rollblock is emerging as a standout DeFi play-to-earn gem with the potential to 100x-1000x gains in the fourth quarter and beyond.

The project features an innovative revenue sharing model and exceptional accessibility, attracting players and investors. Additionally, Rollblock’s extensive game library of over 150 titles and enhanced sports betting are further driving excitement for the platform. Cryptocurrency analysts are expecting a sudden surge in demand. 800% a push for Rollblock from the beginning of September.

Bonk remains strong despite market fluctuations

While most well-known cryptocurrencies struggled throughout July, Bonk remained strong. As one of the highest-grossing meme cryptocurrencies of 2024, Bonk rose over 24% in July, while most cryptocurrencies experienced negative fluctuations.

Investors looking to add a relatively safe memecoin to their portfolio should consider Bonk. While Bonk is unlikely to generate explosive gains of 250x to 1,000x from here on out, Bonk could still theoretically provide returns in the 20x to 100x range.

Pepe should see a big rise in the next bull run

Alongside Bonk, Pepe has yet to go through a bull run. This means that there are still substantial gains to be made from Pepe over the next 12 months.

Pepe is down 4% in 30 days, but that shouldn’t worry Pepe investors in 2024. Experts believe Pepe’s best days are still ahead, with crypto analysts predicting a 10x to 50x surge in the next election cycle around November.

In the long term, Pepe could surpass the 100x mark for today’s investors. However, Pepe is a memecoin, and one should exercise caution when investing in purely speculative assets that have no utility.

Rollblock’s Unprecedented Hype Potential Could Push It Past 100x Valuation in Q4

Rollblock is a GambleFi Play-to-Earn token that integrates centralized and decentralized gambling on a single platform. By allowing players to earn rewards through active participation and gameplay, the platform creates a compelling incentive structure that appeals to both casual and competitive players.

With its cutting-edge blockchain technology, Rollblock offers top-notch security that keeps bets and transactions on the platform secure. The platform’s lack of KYC mandates appeals to both users who value anonymity and security.

Rollblock’s revenue sharing model, which allocates up to 30% of casino revenue to RBLK token holders, is a major draw for investors. The model involves burning half of the repurchased tokens and distributing the other half to stakers, increasing the token’s value and encouraging long-term investment.

The platform is also constantly evolving thanks to user feedback which has enabled updates such as the upcoming sports betting feature within the platform’s casino. This addition will complement Rollblock’s extensive game library of over 150 titles, ranging from traditional poker to innovative blockchain-based games.

RBLK is expected to emerge as one of the leading DeFi tokens in 2024. With a price of $0.0172 with impressive growth potential and over 140 million tokens sold recently, Rollblock is on track to enter the top 100 cryptocurrencies by Q4, making today a lucrative time to buy RBLK tokens.

Discover the exciting opportunities of the Rollblock (RBLK) presale today!

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DeFi

Cryptocurrency sector is experiencing ‘most misjudged moment’ since 2020, says venture capitalist Arthur Cheong

Published

6 months ago

29 July, 2024

CoinFlix Staff

Cryptocurrency sector is experiencing ‘most misjudged moment’ since 2020, says venture capitalist Arthur Cheong

Veteran cryptocurrency investor Arthur Cheong believes the digital asset sector offers long-term holders a golden opportunity.

Cheong, the founder of DeFiance Capital, tell His 171,700 followers on social media platform X indicate that he believes decentralized finance (DeFi) is hugely undervalued.

According to Cheong, DeFi projects are innovating at a rapid pace and leaving traditional financial (TradFi) companies in the dust.

“It’s been a long time since I’ve been this excited about the risk/reward and potential upside of DeFi. This is probably the most misjudged moment since the pre-DeFi summer of 2020, with extremely promising prospects.

I see opportunities not only in OG (original) DeFi, but also in some newer projects that are evolving rapidly and growing at a pace that fintech startups will do anything to match.

The veteran investor also believes that crypto is now here to stay following recent launch from the Ethereum spot market (ETH) exchange-traded funds (ETFs) last week.

“Overall, the floodgates are open and there is no turning back. TradFi asset managers will continue to launch new crypto products because, guess what: there is huge demand for them!”

I expect them to launch actively managed crypto ETFs [in the] coming years. ”

Earlier this month, Cheong laid that it might be a bad strategy for cryptocurrencies to seek mass adoption, believing that digital assets are designed to disrupt several key financial sectors.

“I think we should accept that cryptocurrencies may not be suited for mass adoption like Web2, but rather are optimized for some narrow but very high-impact use cases like stateless global money, cross-border payments, and decentralized finance.

Chasing mass adoption of normies may be chasing the wrong Grail from the start.

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