Thread by @SinoGlobalCap

Lending with Clearpool
With @ClearpoolFin now launched on @Polygon we decided to share our thoughts on why we invested in, lend on, and are bullish about Clearpool’s decentralized institutional lending platform. app.clearpool.finance *DYOR* (1/35)

The Institutional Lending Market
Clearpool provides loans to institutional borrowers, which are predominantly trading shops at present like @wintermute_t @folkvangtrading @ambergroup_io who make markets in crypto pairs on both centralized and decentralized exchanges. (2/35)

Increased market making activity is healthy as it increases liquidity, reduces slippage, increases depth, etc. (3/35)

https://twitter.com/ianw888/status/1550563044035796992

Loan Originators
Trading shops take loans from:
- Centralized lenders like @CelsiusNetwork
- DeFi undercollateralized loan platforms
- Exchange lines of credit
- Bespoke lending
(4/35)

Current State of On-Chain Uncollateralized Lending
Centralized lenders originated billions of dollars of loans per month. Decentralized
undercollateralized loan platforms by comparison have originated about $3.2B in aggregate. (5/35)

Maple and TrueFi account for the majority of that given their early start. Clearpool has roughly $220M in loans originated since its launch in March 2022. (6/35)

Until recently, centralized lenders represented most of the top MMs borrowing, with decentralized lenders representing less than 15%. (7/35)

MMs opened pools on platforms like Clearpool, @maplefinance, and @TrueFiDAO as alternative sources of financing and because they were the most capital efficient loans on the market. (8/35)

Why Capital Efficiency Matters
Loans are largely used by MMs as trading capital. For pairs like BTC/USD, a MM must (usually) provide both sides of the trading pair from their own balance sheet. (9/35)

For smaller projects, a MM will often receive a loan of the project token, but the USD side of the pair still comes off balance sheet. (10/35)

By reducing the need to lock up capital as collateral–uncollateralized loans represent the purest form of leverage a MM can access. As these loans are uncollateralized, they represent the farthest point out on the risk/reward curve for crypto loans w/ the highest rates. (11/35)

Vital Funding Source
As credit has been sucked out of the ecosystem, undercollateralized lending has become a larger portion of a MMs funding stream. (12/35)

We’ve seen:
-Borrowing demand from current borrowers: Increase
-Demand from new borrowers to onboard: Increase
-APYs: Increase (13/35)

As we noted months ago, the space vacated by centralized lenders opens room for undercollateralized lenders to thrive. (14/35)

https://twitter.com/ianw888/status/1534307153514795008

Healthy For the Ecosystem
A recent issue in centralized lending is there is no central clearinghouse for loans/collateral. This creates a situation where: (15/35)

-Loan collateral was pledged to multiple counterparties
-Little transparency of financial health of a borrower was available (16/35)

Some loans were still underwritten based off dubious diligence worsened by the fact that lenders didn’t share loan info. (17/35)

https://twitter.com/fintechfrank/status/1549128466502647810

Furthermore, when borrower defaults occurred, and contagion started to spread, there was limited understanding of how far the contagion went because loan info wasn’t on-chain. (18/35)

The fallout and list of 3ACs creditors wasn’t fully understood until much later. (19/35)

https://twitter.com/coinstackcrypto/status/1550119766504771588

The solution is encouraging transparency to ensure that there is oversight over bad actors. Clearpool’s on-chain lending model is a large step in the direction of transparency. (20/35)

https://twitter.com/AriDavidPaul/status/1550556050432135171

Important Platform Aspects – Lending Curve

The market rate for uncollateralized lending is still being determined. The borrow rate for some platforms is set by the borrower or a pool delegate. (21/35)

Clearpool is moving to an adjustable interest rate mechanism where Clearpool Oracles (external 3rd parties with expertise in the credit markets) submit parameters on a weekly basis to set the interest rate curve. (22/35)

Oracles whose parameters are within a set range of the median will be rewarded (as well as $CPOOL holders who staked/delegated to the Oracle). As in traditional markets, the idea is to move rates to equilibrium slowly and without large weekly changes. (23/35)

Credit Rating
Current undercollateralized lenders use a combo of pool delegates who manually underwrite and on-chain tools like @xmargintrading. (24/35)

Credit underwriting is imperfect – in our opinion, one of the spaces that is most primed for innovation. (25/35)

https://twitter.com/xmargintrading/status/1547945661164691458

During the onboarding process, KYC/AML is conducted and terms and conditions are signed. Borrowers who want their lending counterparty to be KYC’d can create permissioned pools like the $50M pool between Jane Street and @BlockTower. (26/35)

https://twitter.com/ClearpoolFin/status/1521478241177182208?ref_src=twsrc%5Etfw

3rd Party Builders
Attracting external developers acts as leverage on projects’ resources allowing innovation at a faster pace. (27/35)

@idlefinance recently launched ‘Perpetual Yield Tranches’ which divide the yield in Wintermute's pool into Junior and Senior tranches allowing customers to pick their ideal point on the risk/reward curve. (28/35)

https://twitter.com/idlefinance/status/1549885720310980610

Clearpool’s Positioning
- Infrastructure for decentralized lending to institutions
- Adjustable lending curve that adapts to the market
- Composable platform that allows 3rd parties to build applications
- Risk management tools native to the platform in the future (29/35)

Future Vision
Among the important innovations that we’re excited to see on roadmap are:
- Mainnet Launch on Polygon ✅
- Credit derivatives
-Thematic pools (30/35)

Credit derivatives, e.g. Credit Default Swaps, can be launched b/c Clearpool specializes in single counterparty pools which allow:
-Default insurance to be sold on the pool
-Implied probability of default to be calculated
-Lending desks to hedge out counterparty risk (31/35)

It is ambitious and a BIG step forward for the lending industry. (32/35)

https://twitter.com/jameslavish/status/1551220297814028288

The expansion on Polygon, a chain with talented builders that recently launched their zkEVM, gives a new group of customers access to Clearpool’s lending pools and we’re excited to see another key DeFi project join the Polygon eco. (33/35)

The launch on Polygon will see the introduction of an exclusive limited time promotion where lenders to the genesis liquidity pools launched on Clearpool/Polygon will be able to farm MATIC rewards, as well as the USDC interest & CPOOL LP rewards already available to LPs. (34/35)

For any additional questions on our support of Clearpool please contact @ianw888 @ericnemeth23.
You can find more of our investment theses as well as research content on our Github (github.com/sinoglobalcap) and Medium (sinoglobalcap.medium.com). (35/35)