The world bank reports that more than 2 billion people worldwide lack access to working capital and financial services. Yet records show that only 67% of the world’s adult population is covered by credit bureaus across the globe.
As it seems, the main bottleneck that stands in the way of the increased availability of loans is the difficulty in establishing accurate and reliable credit scoring systems. When it comes to credit scoring, one size simply doesn’t fit all.
In traditional finance, credit scoring systems are highly centralized with an overall structure that is highly data-intensive. While these solutions are gaining more usage by the day, they remain vulnerable to manipulation and in most cases, a large percentage of borrowers are left out of the system.
Decentralized finance options seem to be an emerging solution however, the sector is riddled with overcollateralized platforms that further decrease access to working capital.
Sublime is a soon-to-be-launched decentralized credit system that solves the problem of over-collateralization as well as over-reliance on centralized credit scoring systems. Here is a primer on what the future of debt products will look like.
What is Sublime?
Sublime is a DeFi native application built on the Ethereum blockchain and made up of a system of interacting entities that altogether make up a decentralized lending platform where borrowers can leverage their digital identities to access loans.
Instead of deploying a traditional highly centralized credit scoring system or using an overcollateralized lending and borrowing protocol as is the norm in most DeFi platforms, Sublime offers a solution that cuts both ways with a focus on personal connections, by allowing borrowers to use their social media profiles to borrow from lenders that trust them.
How does Sublime Works?
At its core, Sublime operates as a network of entities that effectively crowdsources credit scoring through individual user feedback. Loans can exist in pool-based structures where multiple lenders satisfy a single loan request or there is also the option of a peer-to-peer lender and borrower interaction through a credit line.
Sublime features a customizable design of debt products in a composable framework that allows third parties to leverage their open-source platform for various purposes.
Its flexibility allows institutions acting as lenders on the network to potentially implement extra KYC for their borrowers or simply work with other whitelisted institutions only in an anonymous on-chain interaction. Decentralized autonomous organizations (DAOs) on the other hand can raise debt publicly from their community.
Just as miners on a Proof of Work network verify the validity of transactions, Sublime is designed such that special entities called Verifiers decide whether an identity mapping is valid or not. Initially, the Sublime Foundation will provide verification but over time will onboard new verifiers to the network to provide verification for other forms of digital identities to the network. As the platform grows, more roles will shift to the governing committee of the ecosystem.
More than a DeFi Borrowing and Lending Protocol
Sublime goes beyond its decentralized credit scoring system and debt protocol to offer other financial services such as decentralized savings accounts. Given the fact that Sublime is integrated with top DeFi protocols such as Aave and Compound, users can deposit their collateral locked in pools across the DeFi landscape and use that collateral to earn interest from within Sublime. This allows users to multiply the amount of yield they can generate thus adding an element of capital efficiency.
Conclusion: A New Era in the DeFi Lending and Borrowing Sector
Sublime is on track to bring its vision to reality given the fact that the startup has already raised $2.5 million in funding from backers such as FinTech Collective, Ryan Selkis, Electric Capital, Galaxy Digital, Collab+Currency, and Jill Gunter.
At its core, Sublime is facilitating a new decentralized form of risk assessment for lenders while allowing borrowers easy access to loans at much lower costs. Going forward, Sublime plans to launch the alpha version of its platform and follow it up with other rounds of fundraising.
While speaking at a press release, Sublime’s founder Ritik Dutta showed his excitement about the coming launch and remarked about how Sublime’s approach could potentially help solve issues with credit even beyond DeFi.
In the coming weeks, Sublime plans to begin its alpha thus giving select users a chance to start using its platform.