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ULV -- Unsecured Lending Vault (Day 287)

Getting Started

Getting started on the MarkerMake Hackathon with Isaac and Dustin from Bloom. They have created a detailed sequence diagram. (See banner image).

Aave's credit delegation vault is perfect for handling the loan servicing component. Here is the video in which Aave's David Truong explains how the credit delegation vault works.

Unsecured Lending Vault (ULV)

Essentially, we will be creating this investor pool called Unsecured Lending Vault (ULV). This pool will be used to fund all the unsecured lendings, where investors earn the standard Aave interest (similar to the "prime rate"), and additional interest from the loans it takes out.

For a borrower, they need to connect their wallet to the ULV smart contract, submit a KYC and credit check with Bloom, the result will be recorded on a Molecule Protocol smart contract. The borrower will find out if they are approved or rejected. If approved, the borrower can borrow up to the approved amount with an approved interest rate with a click of a button. Before the fund can be transferred, the user needs to also sign an offline legal borrower document to agree to the offline default handling process.

How ULV works

With existing DeFi lending, the borrower assumes the (market) risks for borrowing via over-collateralization to gain leverage. In the ULV model, the risk has shifted to the investors who rely on the KYC and credit score as the underwriting criteria, just like how the banks are handling in traditional finance. As risk takers earn the rewards, the investors will be rewarded with the interest payments.

Under the hood, the investors are over-funding the loans as DeFi lending requires. So if the investment pool size is US$100,000 the maximum loan amount can be withdrawn will likely be around US$50,000 due to the over-collateralization requirement.

The credit delegation vault allows a depositor to grant another user to borrow with their collateral, the ULV smart contract uses this function to distribute credits to the borrowers.

Proof of Concept

As we know when we bring the default handling offline, we will be subject to regulation and compliance. For this project to launch for real, we will need to partner with any licensed lenders to handle and create the corresponding legal agreement based on the borrower jurisdiction. This is just a software we are building that demonstrates how we can remove the middleman and remain compliant to liberate the power of money efficiency on-chain.

What's next?

We will post our progress updates here.


To learn more about how you can build Dapps with no blockchain expertise using the APIS project and build compliance tools with the Molecule Protocol, please feel free to PM me on Twitter

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