DeFi Protocol Startup Teller Raises $1 Million
You may not have heard of the startup Teller just yet but it seems they won’t be silent much longer. Having recently participated in A16z’s Crypto Startup School, the company is looking to disrupt both the decentralized finance (DeFi) and lending markets — and will now have some venture capital with which to do so. Last week Teller announced it had raised $1 million in funding. The seed round was led by Framework Ventures with participation from Parafi Capital and Maven11 Capital. With the funds, they’ll continue work on bringing users’ credit scores to the world of blockchain.
Teller is working to build an algorithmic credit risk protocol for decentralized finance. To do this, it plans on using data from existing credit bureaus and apply it to DeFi markets. Thus the Teller Protocol will allow cryptoholders to offer unsecured cryptocurrency loans while reducing their risk. This would stand in contrast to the current market, which relies on overcollateralized loans.
As Decrypt points out, this arrangement has limited the appeal of such loans as they typically require large upfront collateral or carry high interest rates. Given this reality, Teller hopes that their disruptive solutions can help expand the market into the mainstream.
To Teller’s point, although “yield farming” has exploded in popularity, such schemes still lack wide appeal. As company founder and CEO Ryan Berkun explains, “Yield farming is a way for many DeFi protocols to temporarily bootstrap liquidity and generate a convection of interest among crypto traders.” He continued, “But true success for DeFi requires entering mainstream appeal; we need to stop building in a vacuum. In a trustless environment, unsecured loans are tough to architect but necessary for the evolution of DeFi. Current proposed solutions of ‘shared credit lines’ only dilute risk, rather than create true user accountability.” Similarly, Framework Ventures co-founder Michael Anderson said of Teller’s efforts, “We need solutions that offer seamless transitions between traditional finance and DeFi. Credit scores are the mainstay of the lending world, and interoperability with existing systems will allow us to iteratively phase out centralized credit scoring rather than make a sudden and risky transition to trustless lending.”
Since Teller penned their press release, the total value locked in DeFi smart contracts has increased to surpass $3 billion. This only highlights the growing need for Teller’s tools. So while $1 million may not be a ton in the world of venture capital, it will at least help give the startup a boost as it looks toward bigger goals (and surely subsequent funding rounds).