Link to tweet:

https://twitter.com/Subli_Defi/status/1590278370004455424?s=20&t=f8KWMwkDdKoFYpSABlKeMg

Full Thread here:

1/ Lending protocol are DEFI primitive DappsHowever, capital efficiency is not achieved due to liquidity being idle and unusedSo what are the new solutions? Undercollateralized Loans@sentimentxyz is project recently launched on #Arbitrum who solved this!

A thread 👇🧵

https://pbs.twimg.com/media/FhHIlVSXgAAbe52.jpg

2/ Undercollateralized Loans are the new DEFI products which aim to achieve capital efficiency.Few Lending protocols are: @maplefinance @goldfinch_fi @dammfinance @sentimentxyz

3/ While overcollateralized lending is the status quo in #DeFi, loans in traditional finance are often undercollateralized

Overcol. Loan are capital inefficient due to large spread btw Lend & Borrow Yield, except rare occasion like #themerge for $ETH:

https://twitter.com/DefiMoon/status/1559393890939150336?s=20&t=OfIaIF7McCeZlxaFCWdeqQ

4/ You can easily see that on this chart from @compoundfinance

where you see the diff. between borrow & lend rates Vs Utilization rate:

https://compound.finance/images/meta-tag.png

https://compound.finance/markets/ETH

5/ The risk of undercollateralized loan is in case of User default, loan is not paid back, resulting in a loss on the protocol. So what are the solutions?1-Assess the Creditworthiness of borrowers2-On-Chain hypothecation

https://pbs.twimg.com/media/FhHJl-OXgAIsIUk.png

6/ @sentimentxyz is a permissionless undercollateralised onchain credit protocol that allows users to lend & borrow assets with increased capital efficiency and deploy them across DeFiWhitelisted strategy at launch were as shown below, and more will be added in the future: