DeFi lending startup Teller has recently raised $1 million in seed funding to build its first algorithmic credit risk protocol for decentralized finance.
The product will provide aggregated aggregated data into the DeFi lending markets through its interaction with legacy credit scoring systems such as Equifax.
The funding round was led by led by Framework Ventures with participation from Parafi Capital and Maven11 Capital.
Framework Ventures Co-founder, Michael Anderson says:
“We need solutions that offer seamless transitions between traditional finance and DeFi..Credit scores are the mainstay of the lending world, and interoperability with existing systems will allow us to iteratively phase out centralized credit scoring rather than make a sudden and risky transition to trustless lending.”
The algorithmic credit risk protocol will reduce lending risks for crypto holders. This, for instance, will lower entry barriers for mainstream consumers.
Running on the Ethereum blockchain, the solution will also for developers to utilize interacting with existing financial databases, a credit risk algorithm (CRA) thereby reducing the collateral amount required for a loan.
Teller founder and CEO Ryan Berkun said:
“True success for DeFi requires entering mainstream appeal; we need to stop building in a vacuum. In a trustless environment, unsecured loans are tough to architect but necessary for the evolution of DeFi. Current proposed solutions of ‘shared credit lines’ only dilute risk, rather than create true user accountability.”
DeFi products currently rely on over-collateralized ratios of up to 300%, to moderate on the risks associated with it. The sector has been seeing a growth with over more than $2.5 billion in assets locked in it.