Teller, a blockchain infrastructure for distributed lending, has secured $1m in its seed round, which was led by Framework Ventures.
Capital was also supplied by Parafi Capital and Maven11 Capital.
With this financial support, Teller aims to build the first-ever algorithmic credit risk protocol for decentralised finance. The protocol will be a bridge between the traditional finance and decentralised finance spaces by aggregating data from legacy credit scoring systems into decentralised lending markets.
The FinTech claims that decentralised protocols has banked more than $2bn worth of cryptocurrency, with around $1.2bn attributed to overcollateralized lending applications. Applications are using yield farming, which is an interest rate growth hacking strategy, to help popularise their overcollateralized systems. The trouble is these systems lack appeal to mainstream consumers.
Teller founder and CEO Ryan Berkun said, “Yield farming is a way for many DeFi protocols to temporarily bootstrap liquidity and generate a convection of interest among crypto traders.
“But true success for DeFi requires entering mainstream appeal; we need to stop building in a vacuum. In a trust less environment, unsecured loans are tough to architect but necessary for the evolution of DeFi. Current proposed solutions of ‘shared credit lines’ only dilute risk, rather than create true user accountability.”
The Teller protocol aims to lower lending risks for crypto holders and allow anyone to launch decentralised lending markets which offer unsecured cryptocurrency loans. The solution will act as a middleware protocol for the decentralised finance space.
“We need solutions that offer seamless transitions between traditional finance and DeFi,” said Michael Anderson, co-founder of Framework Ventures. “Credit scores are the mainstay of the lending world, and interoperability with existing systems will allow us to iteratively phase out centralized credit scoring rather than make a sudden and risky transition to trustless lending.”
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