Anonymous Secured Lending

“There’s no way anonymous lending can work.” – Anonymous

“Anonymous lending won’t happen any time soon.” – Anonymous

“The future is faster than you think.” – Peter Diamandis, Co-Founder, Singularity University

True cryptocurrencies allow us to exchange value across any distance, without a middleman, and without permission. A little over ten years ago, this wasn’t possible. Today, a whole range of sophisticated financial services are being built on top of this extraordinary new infrastructure. Crypto lending services are now common.

People have invested heavily in cryptocurrencies, hoping that they’ll be worth significantly more in the future. If you’ve acquired crypto for that reason, you aren’t in a hurry to sell it, even though some fiat liquidity might be useful. For that reason, many crypto owners are using this asset as collateral to take out fiat or stablecoin loans, using a financial instrument called a Collateralized Debt Position or CDP.

The origin of CDPs

CDPs have only existed since 2014. They are managed by smart contracts1 that allow anyone to deposit a digital asset as collateral against a crypto loan. The borrowers and lenders may be anonymous. The borrowers and lenders may or may not be people. They may be people, corporations, or smart contracts2.

CDPs were popularized by the MakerDAO (“Maker”) project. Maker allows Ether3 holders to mint Dai, a stablecoin4, by pooling their Ether. They can remove up to 66% of the value of their Ether in Dai, and can get it back by paying back the Dai, removing it from circulation. In the token world, this is called “Burning” a token. Dai can be exchanged for fiat currency, thereby providing fiat liquidity to anyone who locks up their Ether.

The birth of an ecosystem

CDPs are now considered a critical financial product in the crypto world. Maker’s ideas were quickly imitated, with many variations. Many other distributed projects and companies now issue fiat and crypto loans, secured by crypto. Some of these, such as Compound and Dharma, are completely anonymous and automated. Others, such as Nexo and SALT, are custodial5 and require KYC/AML6. Much of the industry’s lending volume is still conjecture, but our early estimates from media, self-reported volume, and publicly available data puts the volume of loans originated at about USD 3.4B.

Lending Anonymously

Anonymity is one of the foundational features of blockchain transactions. Maker, Compound, and DyDx are totally autonomous. No personally identifiable information is asked of lenders or  borrowers. This presents unique opportunities, as well as challenges. 

Currently, these platforms require that customers over-collateralize their loans, so they can only borrow up to 66% of their crypto’s value. This allows the platforms to make sure that if the price of the collateralized asset drops, the collateral can be seized (with fees) before the value of the collateral drops below the value of the loan. This protects lenders, but also makes the product less appealing to potential borrowers. Lenders are currently seeking ways to safely lower the necessary amount of collateral without increasing their risk. Since the borrower is anonymous, the tools to do this need to rely on historical data associated with a borrower’s wallet address.

The future, it turns out, is now.

What we believe in.

At Graychain, we believe that Crytpo lending is inevitable.

We believe that some of todays most relevant voices aren’t being heard. The first step toward hearing them is access to resources.

We believe that cryptocurrency is the foundation of the world’s next financial system.

We believe that entrepreneurs need credit in order to operate and innovate.

We believe that people in the developing world, who have never had consistent access to credit, will finally be able to bring their ideas to life using machinations that the developed world takes for granted.

We believe we can help.

Hitting a home run at Demo Day Hong Kong

What a whirlwind!

After spending 3 months building a demo for the accelerator program, and relentlessly drilling Paul to memorize that pitch until he was ready to tear all his hair from his head, strand by strand, we put on our fanciest gown and Graychain was the belle of the ball, along with 14 other wonderful and diverse debutants.

We had:

AI plays of several flavors
eSports friendly gaming wagers
Edge ML, computer vision
Bolo’s Yolo cabbie mission
Tennis coaches on your wrist
Videos that don’t exist
But after all was said and done
Graychain’s scored the night as won

Paul pitching in front of hundreds of new Graychain fans

We were humbled and elated by the outpouring of interest and support from new potential partners, investors, and customers.

Thanks Zeroth for the amazing opportunity, and we’ll be pitching again at Zeroth’s Tokyo event on March 18th! for details here’s the link: