Our investment in JellyFi
We are excited to announce our seed investment in JellyFi, a capital-efficient DeFi lending protocol that enables crypto loans without collateral. We are joining this round led by our friends at Lemniscap and many others.
At a high level, we believe that the uncollateralized lending market is one of the ripest areas for DeFi growth over the coming years. There are several fundamental advantages that we believe position JellyFi to be the market leader in uncollateralized lending.
Choose your Borrower
Current uncollateralized lending protocols pool borrowers together. You lend your money out and it is distributed amongst a number of different borrowers, each with their own strategies and risk profiles. With JellyFi, each liquidity pool may only be used by one borrower. We believe this will allow institutional investors to carry out more precise risk assessments on their lending, and will remove risks from governance processes used to delegate funds from the pool. Current governance practices used by pool-based platforms are in fact rather primitive, often consisting of a brief forum post, and could become an attack vector in the future.
From the borrowers perspective, this is an improvement in that once whitelisted and set up with a pool, borrowers are able to instantly borrow and repay up to the pre-defined limits of that pool with no additional governance process or wait times.
When lenders are waiting to be paired with a borrower, their liquidity is routed into a large lending platform such as Aave (or a potentially a lending aggregator such as Morpho). This can serve to create a fair “wait list” in the event that there are more lenders than borrowers, without lenders losing opportunity cost. After lenders are matched with a borrower, they realize the designated rate for that pool.
JellyFi is well positioned to make a number of exciting integrations, in addition to the yield optimization integrations touched on above. One example is Superfluid, a streaming payments protocol.