There is a new DeFi lending platform on the market that wants users to stake their “digital reputations” in order to access loans. The platform, called Sublime Finance, aims to assist borrowers in accessing their “social capital.”
Galaxy Digital and Electric Capital, both of which co-led Sublime’s $2.5 million seed funding round, have backed the company. FinTech Collective, Collab+Currency, and angel investors Jill Carlson Gunter and Ryan Selkis were among the other investors.
Sublime founder Ritik Dutta told ULTCOIN365 that the funding was obtained through a Simple Agreement for Future Tokens (SAFT) sale. Sublime, based in India, intends to use the new funds to further develop its platform and launch it in the coming weeks.
Credit checks are being replaced with on-chain histories.
According to Sublime, today’s DeFi market is primarily focused on projects that necessitate overcollateralization of lending agreements. This means that borrowers must secure collateral worth more than the amount borrowed. According to Dutta, this system has drawbacks when compared to the traditional lending market, which typically involves an element of trust.
Instead of a traditional credit check, Sublime will allow users to use their digital identities to obtain undercollateralized loans.
On Sublime, each loan request will function as an independent pool, allowing borrowers to create customizable loan requests that lenders can fulfill. Lenders can evaluate borrowers by researching their digital identities, past loan performance, and other users with whom they have interacted online.
Sublime will accept crypto and NFTs as collateral in addition to social media profiles. To begin, the platform will accept ERC-20 tokens as collateral, including wrapped ether (WETH), wrapped bitcoin (WBTC), Uniswap (UNI), and Compound (COMP). Sublime is internally testing CryptoPunks for NFTs, according to Dutta.
According to Dutta, the Sublime Foundation will initially impose thresholds on some parameters, such as loan size and minimum collateral ratios. The platform expects to mature and remove these restrictions over time, allowing for “organic discovery of optimal parameters” for loans.
According to Dutta, Sublime’s business model is to earn loan origination fees. The platform intends to serve decentralized autonomous organizations (DAOs) and institutions as its use cases.
“DAOs seeking to raise debt can do so by forming pools. Pools function similarly to bonds in that they allow for different levels of seniority “Dutta stated. “They can be used by institutions to create anonymous credit lines among themselves.”
According to Dutta, Sublime will launch its token, LIME, in December. He also stated that the token will be used to decentralize governance, i.e., onboarding new verifiers and supporting more assets, as well as incentivizing borrowers and lenders to participate.