Huobi Ventures Weekly Report #29

Huobi Ventures Weekly Insights

Insight provided by Huobi Ventures

Institutional Unsecured Loan — Supercharging liquidity & Bridging DeFi and TradFi

The current DeFi lending market is dominated by collateralized and over collateralized lending protocols. Assets pledged in top players such as AAVE and Compound exceed $20 billion compared to $1billion locked in unsecured lending protocols.

Therefore, the unsecured lending protocols such as TrueFi, Clearpool are in the early stage and will have great space to grow in the near future. The advantage of unsecured lending is that it can provide long-term benefits to the lender and at the same time allow the borrower to obtain the best capital efficiency, leading to a win-win situation.

Besides, unsecured lending protocols are able to bring institutional liquidity to DeFi space, eliminating the interest rate gap between DeFi and TradFi. The sustainable operation of unsecured loans will depend on the further improvement of on-chain credit rating systems, and zero-knowledge proof will be very important in this area.