Introducing Ribbon Lend
Ribbon’s gen 1 structured products — covered calls and put selling — have found significant traction since inception, attracting $300M TVL at all-time-highs and currently sitting at north of $80M TVL. Gen 2 vaults, starting with principal protected Ribbon Earn, are transitioning from earning yield through selling volatility to earning yield through a combination of loans and exotic options. We expect these products to grow significantly and become much more popular — Ribbon Earn filled up our $5m vault cap within 48 hours.
Introducing Ribbon Lend, Ribbon’s second product line alongside Ribbon vaults. Ribbon Lend can be described as an uncollateralized Aave, allowing depositors to lend unsecured to KYC/AML’d institutional market makers of their choosing with high liquidity. Ribbon Lend offers the best of both worlds between TradFi and DeFi:
High yields from unsecured lending
No lockups from Aave’s money market model
Off-chain enforcement / credit underwriting
Built-in insurance
Earn Enhanced Yield on USDC Deposits
The demand for leverage is at all-time-lows in DeFi. Lending USDC on Aave’s money market yields ~0.25% APY, which is lower than risk-free U.S. treasuries. Lending USDC on Ribbon Lend to institutional market makers currently yields 7%-10% APY organically, plus additional RBN liquidity mining incentives. These are pre-3AC rates — major CeFi lending desks have already come back online to lend to the same market makers.
No Lock-Ups
Most unsecured loans in DeFi are still fixed term — this means that lenders must wait until the loan maturity to exit their position. This leaves a significant void for on-chain USDC holders who are willing to lend unsecured but are unwilling to lock their capital. As DeFi users ourselves, we recognize the immense opportunity cost with being locked in a position.
Ribbon Lend operates like Aave — a peer-to-pool mechanism that sets rates based on utilization of funds in the pool. As long as there is liquidity in the pool, users can exit their loans instantly, and accrue interest only for as long as they have been in the pool. Ribbon Lend’s pools use a utilization curve that incentivizes borrowers to leave some liquidity in the pool to facilitate withdrawals.
Lend to Institutional Market Makers
Offering unsecured lending on-chain requires a developed off-chain process for credit underwriting (including KYC/AML) and legal recourse.
Ribbon Lend’s credit underwriting is powered by Credora, which aggregates information from custody venues, CEX spot / derivatives positions, on-chain positions across >5 chains, bank accounts, and other sources to get a comprehensive picture of a market maker’s credit worthiness. Most of this can be monitored in real-time, so a borrower’s credit worthiness can change on a minute by minute basis. This real-time info comprises ~50% of a borrower’s credit rating weight. The other ~50% are more traditional methods such as looking into borrow history and lending relationships, custody processes, ROE, ROA, max drawdowns, solvency ratio, etc. See Credora docs for more information on credit methodology. Credora has 16 DeFi integrations, 25 CeFi integrations, and +100 borrower/lender institutions onboarded so far. Credora has helped facilitate $785M in loans and monitors $3.85B to date.
Built-In Insurance
5% of the interest accrued every second in a pool is redirected towards its insurance pool, which is to be used towards repaying lenders in case the borrower defaults.
Capital Flow from Ribbon Structured Products
All loans in our structured products, including Ribbon Earn and new vaults, will flow into Ribbon Lend pools. This allows us to leverage our Ribbon structured products as a reliable and sizable source of lending deposits in the credit facility.
Furthermore, this allows our structured products to be redeemable on a weekly basis and potentially even on a block-by-block basis, attracting further TVL.
Conclusion
We see Ribbon Lend as the “Aave for unsecured credit”. With little demand for over-collateralized borrowing, we expect capital to migrate higher up the risk curve on-chain for more attractive liquid yields, and Ribbon Lend is in a prime position to capture much of that capital.
We aim to launch the week of September 25th.
We Are Hiring!
We’re growing very quickly and are looking for exceptional people to join our team. If you are interested in DeFi, derivatives, or building the future of finance, check out our Careers page to see if there are any roles that may fit your skillset.
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