Parafi Capital and Maven 11 Capital participated in this round, too. The new funds will be used as a means to develop “the first-ever algorithmic credit risk protocol for decentralized finance (DeFi),” according to Teller. The new platform will connect traditional credit scoring systems like Equifax to decentralized lending markets.
Teller is among DeFi protocols that recently experienced significant growth and user attraction. This novel ecosystem within the blockchain community now manages more than $2 billion worth of cryptocurrencies. Most of them focus on lending in a decentralized environment, and some others like Teller try to connect these new concepts to traditional systems.
Yield farming is a technique among DeFi protocols used for popularizing their systems. Teller claims this solution doesn’t attract regular people looking for real-world lending and loans.
“Yield farming is a way for many DeFi protocols to temporarily bootstrap liquidity and generate a convection of interest among crypto traders,” said Ryan Berkun, Teller founder and CEO. “But true success for DeFi requires entering mainstream appeal; we need to stop building in a vacuum. In a trustless environment, unsecured loans are tough to architect but necessary for the evolution of DeFi. Current proposed solutions of ‘shared credit lines’ only dilute risk, rather than create true user accountability.”
Most of the current decentralized lending platforms are overcollateralized and receive a massive amount of collaterals to protect their lenders (about %150 to %300). Teller tries to reduce lending risks for cryptocurrency holders and change the overcollateralized system.
Teller will act as a tool for developers to create lending markets without the need for that much collaterals. It provides services like Teller Protocol, Teller Cloud, Credit Risk Algorithm, and Autonomous Teller Markets that will ultimately lower the barriers for making decentralized lending markets. Framework Ventures believes connecting credit scoring system to novel lending platforms will help mainstream users benefit from new services more comfortable.
“Credit scores are the mainstay of the lending world, and interoperability with existing systems will allow us to iteratively phase out centralized credit scoring rather than make a sudden and risky transition to trustless lending,” said Michael Anderson, co-founder of Framework Ventures.
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