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Wednesday, March 3, 2021

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Home Business & Finance DeFi Lending Platform Enables No-Collateral Loans With New Feature

DeFi Lending Platform Enables No-Collateral Loans With New Feature

Document Analysis NLP IA

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redaction

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not certain if it's an affirmation
Affirmation0.17279411764706

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Key Concepts (and relevance score)

Summary (IA Generated)

The Aave lending protocol recently launched a new feature called Credit Delegation.

This feature allows users to provide peer-to-peer loans with no formal collateral requirements.

The Credit Delegation feature relies on peers to enter into agreements between each other that allow borrowers to use the lender’s credit line freely.

The use of peer-to-peer intermediaries allows to circumvent limitations inherent to DeFi, where the protocol cannot recover a borrower’s loan outside of the blockchain.

All lending platforms require posting more collateral than what is borrowed, heavily limiting the possible use cases of blockchain lending.

The intermediary takes ownership of the risk of insolvency for the borrower, as the protocol can access their collateral.

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Aave’s efforts can be considered as one of the first initiatives to bring DeFi to non-crypto use cases, following initial proposals from Maker to onboard music royalty rights as a form of collateral.

Aave has traditionally placed emphasis on DeFi composability, featuring flash loans and using other protocol tokens as collateral.


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