Ribbon Finance launches high-interest loan product
You have probably heard that the unfavorable macroeconomic conditions in the world have made many participants in the cryptocurrency market avoid risks.
However, early activity at Ribbon Finance suggests otherwise. This company specializes in structured products and has recently launched a high-interest loan product.
Lend Ribbon allows contributors to lend unsecured funds to institutional market makers of their choice with high liquidity.
In the protocol, users deposited $15 million, a stablecoin pegged to the US dollar.
Of that, over $10 million was borrowed by Alameda-backed quantitative trading firm Folkvang Trading and market maker Wintermute, which recently lost $160 million in a hack.
“We see that there is still a demand for high returns in decentralized finance. Users are willing to shift the risk curve if the risk/reward ratio makes sense,” told Julian Koch, co-founder, and CEO of Ribbon.
“Unsecured lending to reputable institutional trading firms seems to fit this category well.”
At the time of writing, the annual percentage yield on the USDC loan to Folkvang and Wintermute was nearly 7%. This is significantly more than the 0.5% available on leading decentralized platforms such as Aave and Compound.
“Unsecured Aave, offering the best of traditional and decentralized finance,” allows institutions to borrow USDC from AAVE at a much lower cost, but at the cost of locking another cryptocurrency as collateral.
In other words, the borrower risks losing the liquidity of the blocked collateral, which is not the case with Ribbon’s Lend.
Meanwhile, credit users can earn higher returns from unsecured lending to entities whose creditworthiness has been assessed by Credora.
In addition, lenders can exit their positions at any time as long as there is liquidity in the pool. According to Ribbon, most unsecured decentralized finance (DeFi) loans are for a fixed term, which means lenders cannot withdraw deposits before the loan expires.
DeFi is a term used to describe financial activities carried out on a blockchain without the help of intermediaries.
“Borrowing through Ribbon is more capital efficient,” said Folkvang chief investment officer Jeff Anderson.
“With the advent of Lend, Ribbon now offers a one-stop shop for the full range of DeFi products, and we are proud to be the pioneers on this platform.”
Ribbon recently launched the Aevo crypto options exchange, first introducing the concept of a decentralized options vault (DOV) in 2021.
DOVs have simplified option trading by allowing investors to simply place their assets in vaults that use them in profitable option strategies.
Ribbon’s foray into unsecured lending may indicate that a sector dominated by the likes of Maple Finance, Clearpool and TrueFi is heating up.
A recent Reuters report cited by TrueFi estimates the total value of the unsecured lending market at $25 billion.
In addition, a Reuters survey of 11 lenders indicated a willingness to continue unsecured lending despite a broader market collapse.