Teller, a decentralized finance protocol that provides unsecured digital asset lending and borrowing, said Wednesday it has closed on a $6.85 million strategic financing with a group of investors, led by Blockchain Capital, to build an open order book protocol that can be used by third parties to build their own marketplaces for unsecured decentralized finance (DeFi) lending.
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According to Teller’s announcement, the investors led by Blockchain Capital include Franklin Templeton, Toyota Ventures, Bessemer Venture Partners, Upstart, Signum Capital, and angel investors from Paypal, Fundera and Bison Trails.
Proceeds from the $6.85 million financing will be used to expand marketplace integrations, which will enable uncollateralized lending in DeFi, and unlocking opportunities once only available to traditional financial markets, according to Teller’s announcement.
“We operate similar to the back office of a bank from an infrastructure standpoint,” says Ryan Berkun, CEO and founder of Teller. “We’re an open order book so that borrowers can come through, request the loan, and they can append data to that loan. On the flipside, lenders can view the data and make an analytical decision as to whether or not they want to underwrite and then lend to that borrower. But we operate as that back-end infrastructure, supporting entrepreneurs that make categories of these loans on top of us,” Berkun told ZDNet.
The name of the game for Teller is to take so-called traditional financial primitives — the core building blocks of financial markets — to play in the DeFi space: data-driven, unsecured lending and borrowing of crypto assets. The impetus for Teller, according to Berkun, came three years ago when he was working as a consultant and developer and noticed a consistent issue with DeFi, namely that it was in a state of over-collateralization. That’s fine for holders of crypto assets because they can be put to use, but the use case from the borrowing side is limited to either trading or holding the crypto assets. “I wanted to build a platform that could extend to the mainstream audience without them needing crypto assets, to begin with,” Berkun said. The question then became how to unlock unsecured lending in the DeFi space. “To me, that always meant pairing the current credit system and the traditional data world with the efficiency from an asset standpoint of smart contracts. And then Teller was born.”
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The Teller Protocol is similar to that of a limit order book, which enables borrowers to use data outside of a blockchain (off-chain data) with loan requests on a blockchain or on-chain. Based on the data provided or required, lenders and borrowers that have matching bids and asks transact directly. According to Teller’s announcement, those requesting to borrow assets propose a loan request, and those supplying assets commit those assets to loan requests of their choosing.
“Unsecured lending is a thorny problem in the pseudonymous on-chain world and one of the largest opportunities for DeFi,” said Bart Stephens, co-founder and managing partner of Blockchain Capital. “The Teller Protocol enables traditional and crypto native lenders to use the best credit scoring techniques possible while preserving privacy and tapping into decentralized liquidity pools.”
According to Teller, DeFi protocols today account for more than $200 billion in total value locked, mainly from overcollateralized lending and trading applications. Teller is convinced that the undercollateralized market is becoming the next sector of DeFi.
Institutional lenders and capital providers using the Teller Protocol will have the opportunity to create their own automated data-driven criteria for committing assets to lend based on rules and filtered by borrower request information. Teller hopes this new layer of DeFi will broaden the appeal of DeFi in global capital markets.
