Digital assets are the primary driver of blockchain adoption. From BTC and ETH, to DAO shares, LP deposits, derivatives, NFTs, real-world assets, and more, digital assets are core to crypto. To date, however, DeFi money markets support only a limited number of digital assets as collateral. These protocols minimize the risk of price manipulation, and the subsequent potential loss of liquidity provider capital, at the constraint of capital efficiency for digital asset holders.
More recently, the DeFi credit ecosystem has emerged, with on-chain credit scores accounting for wallet behaviour. Most relevant data around over-collateralized repayments and liquidations filters into these scores. By analyzing onchain credit, liquidity providers have greater insight into the historical probability of repayment on a per-wallet basis.
The Teller protocol brings forth the first use case of onchain credit in DeFi by replacing price-based liquidation pools with fixed collateral, fixed duration loans in concentrated liquidity order-books. This, in turn, enables borrowers to leverage any digital asset as collateral, without price-based liquidation risk. Furthermore, liquidity providers can earn yield above money market rates, with insights into wallet repayment probability and onchain credit recourse on default.