Solana-Based Platform Friktion Debuts Collateralized Crypto Lending For Institutions
- Friktion has debuted a new crypto lending product for institutional clients who aim to get higher yields in the space via exposure to cryptocurrencies.
- The offering will include tranched pools ranging from junior tranches to senior tranches with the former providing higher annualized yields ranging between 11% and 17% in return for covering senior lenders against loan defaults.
- Friktion stated that third-party underwriters called “conductors” will be responsible for conducting due diligence on borrowers before launching loan pools.
Solana-based portfolio management platform Friktion has debuted a new crypto lending product for institutional clients who aim to get higher yields in the space via exposure to cryptocurrencies. This new product comes at a time when the market has seen a significant downside following a decline in cryptocurrency trading volumes. Additionally, the product is tied to institutions, which could mean that there is an increased demand for crypto lending among institutions.
According to a report, Friktion will provide higher yields to the institutions who take part in this new product and also, the firm revealed that its crypto lending product will provide access to under-collateralized loans for borrowers. This means that for any borrower who aims to borrow money from the platform, they will not have to put up any collateral which will be higher or equal to the amount of the loan. Additionally, it could be a capital-efficient form of borrowing.
The firm also confirmed that its crypto lending product will offer enhanced lender protection as it will include tranched pools ranging from junior tranches to senior tranches with the former providing higher annualized yields ranging between 11% and 17% in return for covering senior lenders against loan defaults. In an attempt to reduce counterparty risks, Friktion will also include a diverse cast of borrowers.
The lenders which take part in the senior pools mentioned above can earn yields in the range 8% and 10%. Moreover, Friktion also revealed that third-party underwriters called “conductors” will be responsible for conducting due diligence on borrowers before launching loan pools. This is also a part of investor protection that the platform offers. Background checks are very important because under-collaterized loans can pose serious risks to lenders especially in cases wherein the borrower fails to repay.
“Throughout the tenure of the loan pool, conductors will also perform real-time risk monitoring of borrowers’ positions both on exchanges and on-chain,” Friktion said while adding, “In an unlikely event of default, the junior pool serves as first loss capital and provides default protection to the senior pool.”
It is crucial to note that DeFi lending is most of the times overcollaterized. For exampe, Aave and Compound require borrowers to put up collateral in excess of the loan amount. Friktion, however, has debuted under-collaterized crypto lending which makes it one of the first firms to do so. This offering has been introduced despite the recent failures of multiple crypto lenders like Celsius Network, and others.
A crypto journalist with over 3 years of experience in DeFi, NFT, metaverse, etc. Parth has worked with major media outlets in the crypto and finance world and has gained experience and expertise in crypto culture after surviving bear and bull markets over the years.
