Sublime, a decentralised lending platform, said it has raised $2.5 million in a financing round from Electric Capital, Galaxy Digital, FinTech Collective, Collab+Currency, Jill Carlson Gunter, and Ryan Selkis.
The company will use the funds to develop its platform and launch it in the coming weeks.
Users on Sublime can verify their digital identity using their profiles on sites like Twitter, Github, and Instagram, staking their reputation as collateral in addition to non-fungible tokens, cryptocurrencies, or other blockchain-based assets.
The company said next week it will begin its private alpha, allowing creators and DAO (decentralised autonomous organisation) contributors to collateralise future payments with complementary, privacy-preserving solutions in its road map.
Sublime said traditional credit scoring methods are highly data-intensive, making them susceptible to bias or painting an incomplete picture of a borrower’s creditworthiness, particularly for those with a limited financial history. This limits the pool of potential borrowers. Furthermore, such data either doesn’t exist on-chain or is otherwise highly manipulable.
The company said, “In the absence of legal repercussions or updates to one’s off-chain score based on on-chain activity, several defaults are to be expected in the initial bootstrapping phase, a process which may take years to mature. It is not clear if DeFi lenders are ready to absorb the risks of such almost certain defaults right now.”
“A trader’s on-chain history of yield farming or over-collateralised borrowing are poor indicators of their likelihood to return under-collateralised loans, making running any machine learning models over such data largely irrelevant,” Ritik Dutta, founder of Sublime, said.
“We’re excited about how the open architecture allows myriad use cases - for instance, DAOs can raise debt by issuing pool-based bonds with different levels of seniority, or institutions can set up private credit lines amongst each other,” Avichal Garg, partner at Electric Capital, said.
“Positions in pools which are tokenized into ERC-20 assets allow users to build structured debt products on top of Sublime,” he added
The investors have continued backing startups in the crypto space.
Early October, cryptocurrency staking management platform Stader Labs raised $4 million in its seed funding round led by Pantera Capital.
In September, LayerZero, a multi-blockchain omnichannel interoperability protocol firm, raised a $6 million funding round co-led by Binance Labs, the venture capital firm and incubator of Binance, and Multicoin Capital.
Meanwhile, cryptocurrency adoption has also been growing in India, despite regulatory uncertainties. According to an October report from blockchain research firm Chainalysis, the country ranks amongst the top three in the world in terms of crypto adoption. Chainalysis noted that Indian investors were more mature than Pakistan and Vietnam — the other two in the top three — with more institutional investors joining the market.