In the last two years, the decentralized finance (DeFi) industry has grown by more than 1,000%, due in large part to an explosion of interest in the decentralized crypto loans sector.
This huge interest has seen a huge number of platforms spawn to help cater to the growing needs of the industry, improving the variety and range of options on offer, and making the industry more accessible than ever before.
However, this rapid growth has also highlighted several key areas in which the DeFi lending industry still lags behind its traditional counterpart, demonstrating the need for an out-of-the-box approach to modern finance.
Good, But Not Enough Enough
Although the industry is growing at a staggering rate, most crypto lending platforms are poorly equipped to scale and few, if any, are able to effectively handle the risk that comes with this growth.
In addition, the way these platforms handle collateral risk has largely remained unchanged in the last two years. Put simply, borrowers deposit their collateral in return for a fixed loan value based on an inflexible maximum loan-to-value (LTV) ratio.