There is a new DeFi lending platform on the market that wants to allow users to stake their “digital reputation” to access loans. Called Sublime Finance, the platform wants to help borrowers tap into their âsocial capitalâ.
Sublime has received backing from investors such as Galaxy Digital and Electric Capital, who both co-led its $ 2.5 million funding round. Other investors included FinTech Collective, Collab + Currency and angel investors including Jill Carlson Gunter and Ryan Selkis.
The funding was secured through a sale of Simple Agreement for Future Tokens (SAFT), Sublime founder Ritik Dutta told The Block. With the new capital, India-based Sublime plans to continue to develop its platform and launch it in the coming weeks.
Replacing credit checks with chained histories
Sublime says today’s DeFi market is primarily focused on projects that require oversizing loan agreements. This means that borrowers must lock in more collateral value than they are borrowing. This system has drawbacks, according to Dutta, compared to the traditional credit market which usually involves an element of trust.
But instead of a typical credit check, Sublime will allow users to leverage their digital identities to obtain sub-secured loans.
Each loan request will act as an independent pool on Sublime, meaning borrowers will be able to create customizable loan requests that lenders can fulfill. Lenders can assess borrowers by researching their digital identity, past loan performance, and other users they have interacted with online.
In addition to social media profiles, Sublime will also support crypto and NFTs as collateral. For starters, the platform will accept ERC-20 tokens such as Wrapped Ether (WETH), Wrapped Bitcoin (WBTC), Uniswap (UNI), and Compound (COMP) as collateral. When it comes to NFTs, Sublime is testing CryptoPunks internally, Dutta said.
As a first step, the Sublime Foundation will impose thresholds on certain parameters, such as loan amount and minimum collateral ratios, Dutta said. Over time, the platform expects to mature and remove these restrictions to enable ‘organic discovery of optimal parameters’ for loans.
Sublime’s business model is to collect loan origination fees, Dutta said. As for its use cases, the platform hopes to serve Decentralized Autonomous Organizations (DAO) and institutions.
âDAOs looking to get into debt can borrow by creating pools. Pools are functionally similar to bonds and allow for different levels of seniority,â Dutta said. “Institutions can use them to create anonymous lines of credit between themselves.”
Sublime will launch its token, LIME, in December, Dutta said. He added that the token will be used to decentralize governance, meaning onboarding new auditors and supporting more assets, as well as encouraging the participation of borrowers and lenders.
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