How FinTechs Are Leveraging DeFi To Scale Revenue
Since its inception DeFi has evolved at a rapid pace. This evolution is the byproduct of iterations made by many protocols; beginning with the introduction of Bitcoin in 2009, to the more formal inception of DeFi a couple years later; to the mature and refined version of DeFi that exists today.
Before we jump into where DeFi is headed, let's quickly recap where it’s been and some of the defining iterations of its evolution. Bitcoin, established in 2009 by Satoshi Nakamoto, enabled users to send money around the world in a decentralized manner. Bitcoin laid the foundation for Ethereum; which launched in 2015. Ethereum quickly became the favored smart contract platform for developers to build a range of applications on; including games like Crypto Kitties and financial applications like early DeFi pioneer Maker, and its decentralized stablecoin DAI. Ethereum ultimately laid the foundation for borrowing, lending, trading, derivatives, and the current financial ecosystem that we call DeFi today.
Fast forward to the ICO bubble of 2017 and we see the inception of industry titans like Aave, Bancor, Synthetix and layer 2 scaling solution Polygon (formerly Matic). Despite the madness and mania that characterized the 2017 ICO bubble; many of the survivors in the DeFi space are still with us to this day and thriving. 2019 saw two of the most important iterations in the history of DeFi: the 2019 launch of Uniswap, which featured liquidity pools and automated market making, and the launch of the first liquidity incentives program by Synthetix.
In 2020, Compound introduced its liquidity rewards program of COMP tokens; whereby users were rewarded in COMP tokens for borrowing and lending on Compound. The added bonus of receiving COMP tokens for borrowing and lending resulted in dramatically higher APYs for many tokens. After Compound we saw protocols emerge like Yearn; a yield optimiser that focuses on maximizing DeFi capabilities by automatically switching between different lending protocols. At the same time, the emergence of layer 2 solutions like Polygon made user-to-user loans more cost effective by reducing the burden of the higher transaction costs on layer 1.
Naturally, the enthusiasm for DeFi has spread from DeFi protocols to traditional startups and institutions who previously operated off-chain. Crypto is capital; and pragmatic operators are increasingly realizing that the opportunities brought about from DeFi can be realized across a wide variety of sectors; offering borrowers access to fast and cost-effective capital without the bureaucracy and administrative overhang of traditional banking. Credit markets in general are optimal for fast-growing companies with product-market fit and positive unit economics. If a company is growing fast, with product-market fit, and positive unit economics; credit markets are advantageous to equity markets as no dilution occurs to the capital structure of the organization.
A great example of the success fintech companies are having launching credit markets on Teller is Koala. Koala builds fair and simple travel insurance products and services for the travel industry. Koala, through DeFi loans on the Teller Protocol, doubled their number of active flight insurance policies and repaid their first 10 loans at 15% APY on the Polygon network. The loans facilitated through their Teller market provided additional capital that helped Koala double their number of active flight insurance policies and grow revenue by 33% in one month.
In line with Koala’s success is Mmasi. Mmasi is a DeFi protocol that provides African businesses with an easy way to finance working capital, providing an avenue for lenders to invest and earn interest. Mmasi operates in the trade finance industry; where businesses can sell their invoices at a discount to receive the capital before having to wait for the receivable. Mmasi isn’t the only invoice finance company leveraging Teller Protocol. Polytrade brings safe and insurance backed real world assets to DeFi. Polytrade provides real world borrowers access to low interest and swift financing; to free up working capital.
DeFi is maturing, and so is its value proposition to lenders, borrowers and market owners. From its humble beginnings of yield farming and incentives; we’re witnessing DeFi take the next evolutionary step by bringing real world assets and industries on chain. Teller Protocol has facilitated mortgages, buy now pay later loans, private equity, insurance, and trade finance loans; all on-chain and connecting real world fintech, institutional, and retail borrowers, with crypto lenders. Stay tuned as we onboard new markets in a variety of sectors and industries around the world!