Social Finance Startup Sublime Raises $2.5 Million to Democratize Credit

DeFi lending platform lets users stake their digital reputations to access loans

BANGALORE, INDIA / ACCESSWIRE / October 19, 2021 / Sublime, a decentralized lending platform that enables users to leverage their digital identities to access loans, has raised $2.5 million in funding from backers including Electric Capital, Galaxy Digital, FinTech Collective, Collab+Currency, Jill Carlson Gunter, and Ryan Selkis.

The Decentralized Finance (DeFi) ecosystem as it exists today is overcollateralized. Sublime solves this problem by focusing the conversation on how access to credit is determined by letting borrowers tap into their social capital.

Users on Sublime can verify their digital identity using their profiles on sites like Twitter, Github, Instagram, effectively staking their reputation as collateral in addition to NFTs, cryptocurrencies, or other blockchain-based assets. Borrowers using Sublime can set up fully customizable borrow pools and credit lines, which can be fulfilled by lenders who are comfortable with the terms of the debt.

Traditional credit scoring methods are highly data-intensive, making them susceptible to bias or painting an incomplete picture of a borrower’s creditworthiness, particularly for those with a limited financial history. This limits the pool of potential borrowers. Furthermore, such data either doesn’t exist on-chain or is otherwise highly manipulable.

Porting off-chain scores on-chain is an equally poor starting point. In the absence of legal repercussions or updates to one’s off-chain score based on on-chain activity, a number of defaults are to be expected in the initial bootstrapping phase, a process which may take years to mature. It is not clear if DeFi lenders are ready to absorb the risks of such almost certain defaults right now.

“A trader’s onchain history of yield farming or over-collateralized borrowing are poor indicators of their likelihood to return under-collateralized loans, making running any machine learning models over such data largely irrelevant,” said Ritik Dutta, founder of Sublime.

Sublime’s vision is to create a DeFi-native social graph that enables access to credit without the need for centralized scoring systems. Bootstrapped using existing trust networks, the system facilitates interaction between entities without direct personal relationships through mutual connections, in a system resembling payment channels in the Bitcoin Lightning Network. Sublime developers expect to see the formation of hubs in this network akin to banks down the line.

“We’re excited about how the open architecture allows myriad use cases – for instance, DAOs can raise debt by issuing pool-based bonds with different levels of seniority, or institutions can set up private credit lines amongst each other. Positions in pools which are tokenized into ERC-20 assets allow users to build structured debt products on top of Sublime,” said Avichal Garg, partner at Electric Capital.

Sublime is set to launch its alpha in two weeks, starting off with a select group of users with access to their network.

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SOURCE: Sublime Finance

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