The Next Evolution of On-Chain Money Markets
Simplified Architecture Map
Lending and borrowing protocols on-chain (DeFi money markets) have proved themselves, building and retaining sustainable TVL in the tens of billions. However, almost all lending on chain requires over-collateralization, which limits its utility. While over-collateralized borrowing is useful to an extent, under-collateralized or fully unsecured (credit based) lending dwarfs the TAM. This should be obvious: the ability to borrow and employ more capital than you have is more useful than the ability to borrow up to the same amount that you have.
Data from the St Louis Fed corroborates this intuition. At least 85% of debt in traditional business capital markets is typically either fully unsecured or under-collateralized. Therefore, the under-collateralized market could be at least 4x the size of the current DeFi lending market, making the category a minimum $70b market if using bear market TVL metrics. If all assets eventually migrate on chain, the market opportunity eventually grows well into trillions.
Currently, the on-chain landscape for lending and leverage is lacking in both accessibility and wide support of assets and strategies.
Blueberry is a decentralized, permissionless lending market at its core, which whitelists loan deployments that can sometimes be performed with greater than 100% LTV. Borrowers post collateral, then deploy their loan through the aggregated whitelist of strategies. Loans are non-custodial, meaning that neither the protocol nor the borrower are able to take control of the funds. Rather, the 3 components: Collateral, Loan, and Deployment, are wrapped into a “Position NFT” held by the bank that can be redeemed for its PnL should the borrower decide to close their position.
The Blueberry DAO acts as a decentralized risk department of a bank, determining appropriate risk parameters such as LTV and Min/Max Positions based on the deployment of the loan. DAO contributors including contract development shops and top security firms work through governance to ensure loans are safe and liquidations can be performed profitably when necessary. By isolating risks based on the deployment, the protocol increases safety for both lenders and borrowers. It also allows the protocol to support mid-cap assets.
Phase 1 Borrow Deployment Integrations
Over time, Blueberry can scale to become an underwriter of risk for any type of loan and incorporate credit + Optional KYC to scale into the largest lending markets globally, such as mortgages and other credit-based lending facilities.
The DAO will begin by offering integrations with popular loan deployments which are accessible on chain today, including the following categories:
- 1.Liquidity Provision / Yield Arbitrage: Automated LP yield strategies that earn trading fees, LSDs, and more
- 2.Leverage Trading: Access leverage into directional trades while maintaining full custody and earning yield rather than paying it
- 3.Real World Assets: KYC’d, Qualified Investors can access leverage into the low cost of capital on chain in order to deploy to RWAs such as treasury bills
Last modified 1mo ago