According to Better Markets, U.S. global banks, including JP Morgan and Wells Fargo, had racked up over $200 billion as fines and penalties in 20 years by December 2020. Charges ranged from money laundering, fraud, and other criminal conducts.
When banks were crippling the global economy, Bitcoin and blockchain were being launched. Today, the technology has evolved to include decentralized finance (DeFi). Creators are setting to disrupt the multi-trillion finance system, rigid to adapt and integrate new technology.
By early Apr 2021, DeFi protocols in Ethereum alone had over $49 billion as TVL. A big chunk of it is held by lending and borrowing protocols like MakerDAO and Aave. Others, enabling trustless token swapping and derivatives trading like Synthetix, also had a significant share of TVL.
However, despite being popular democratizing access and allowing retail investors to partake in investments that were initially cordoned off, DeFi as a sub-sector continues to innovate. Presently, the problem with lending and borrowing protocols is that rates are pre-determined, cutting across all investors regardless of their risk appetite.
Accordingly, a new project, Credefi, aims to change this arrangement. Instead of algorithm setting lending and borrowing rates, they will be launching a hybrid system. This new system takes advantage of the best of both centralized and DeFi worlds for better autonomy and flexibility. Eventually, the project aims to be a market-driven and automated crediting system. The project aims to launch its native token, CREDI at the beginning of June, functioning as a governance and reward mechanism.
The protocol will launch on Ethereum, introducing a platform where a participant’s contracted interest is defined by their risk appetite. This way, Credefi hopes to revolutionize the way money is utilized. They will provide a wide array of services and connect willing parties of borrowers and lenders, including the option of investing in credit portfolios or providing trade finance services.
Aside from helping drive financial inclusion, Credefi is partnering with an EU-licensed financial institution.
Today, we will have a sit-down with the CEO of Credefi, Ivo Grigorov. He will take us through the state of crypto and DeFi, his plans for the company, and the future of DeFi.
1. Welcome, Ivo, three years, over $49 billion locked by DeFi protocol, unprecedented. Did you expect this?
By no means. Decentralized finance is evolving at an astounding rate that could have never been foreseen in the past. This figure now grows at an exponential rate, and the credits for this go to the global pandemic and the fact that people have seen the potential of the crypto world.
In the face of the turbulence and uncertain times ahead, we may anticipate even higher growth to come. By and large, unfolding with this pace, DeFi could soon present a serious rivalry to the traditional financial sector. As a result, in the near future we may find ourselves free from the dominance of banks and other traditional institutions.
2. U.S. banks have been hit with over $200 billion in fines and penalties since 2008 GFC. Recidivism is also high. Is this part of the trigger towards decentralized financial solutions?
Definitely. If we look at the history of Bitcoin, we will find that it was created as an antidote to the fallacies of regulators and financial markets. This has a lot of rationales behind it. Although many of the illnesses of the financial system were cured through policy measures, particularly tightening of control, in my opinion, it will never be able to function perfectly well — especially, in times of crisis.
The past experience shows that the misfortunes of ones can easily turn into a gain for others — the smell of blood is always alluring for sharks. It’s the duty of governments and regulators to help out the weaker party. Unfortunately, Governments are not always quick to do so. The alternative solution has finally arrived — the one that will belong to the people themselves, not to those who claim to represent their interests. I think this model will thrive a long time to come.
3. Tell us a bit about Credefi.
This is an enterprise that was created with the purpose of representing the people’s interests. We strongly believe in the value of a democratized, people-centered way of money management. We give owners back the control over their own funds, and we, as a platform, do not overemphasize our role as banks often do. I don’t want people to regard themselves as being dependent on us.
It is the other way around: we provide everything in our capacity to make the life of customers better, by enabling them to make informed choices as to where their funds get invested and under what terms.. We provide a full range of banking services, to be personally managed by the users in an independent and decentralized way. Our purpose is to revolutionize the lending segment.
4. From your whitepaper, Credefi is in a partnership with a fully accredited financial institution. Why did you choose to go in this direction?
First of all, I consider the legal aspect to be an integral part of a smooth, successful long-term operation on the market. This is the cornerstone that essentially inclines customers in your direction. We have to admit that although DeFi has already made a big progress in the way it operates, there is still a long way to go.
A relatively high number of unfair practices still dominate the environment, which unfortunately is a deterring factor for those who would willingly undertake the DeFi enterprise as long as it were 100% fair. In my opinion, there’s still a lot of progress ahead in this field, a lot of backlogs to get rid of. That’s why ensuring the legality of a new venture is the first and the right step to take.
5. In a healthcare crisis and, understandably, bankruptcy in some unfortunate events, Credefi is bold and wants to introduce flexible rates. Why now?
Now is the perfect time for DeFi to take on and solve some real, hands-on problems. A few years ago, it would have been a peripheral, almost ignored undertaking, while now it has the chance to play an active role in the economy. Same with our project. As we see, many citizens across the world suffer from the financial damage inflicted by the pandemic.
Due to the scale of their loss, financial institutions are not always ready or willing to secure the victims with monetary support. There are millions of such victims around the world. In my opinion, right now we have to take a step away from the localized approach and reliance on the local institutions for help. We have to search for one global, universal solution — and Credefi aims to provide one of them.
6. How exactly will Credefi guarantee a minimum of 10% APY depending on Risk-Appetite of the user?
This is pretty simple — we leverage our staking mechanism to ensure the consistent and stable supply of funding on our platform. Those who choose to yield-farm, receive a stable return as a reward for their holding. A guaranteed 10% APY is a golden mean — it’s not over the top, but at the same time, it way exceeds many prevalent on the traditional financial market.
We are aiming to suit the individual risk appetite of our users, a guaranteed 10% APY is our benchmark for the lower risk range. However if a user wishes to undertake a higher risk and accordingly receive a higher return they may choose to do so on our platform, the highest risk range offered by our platform can return up to 60% APY per annum. In this sense, our platform goes way beyond what banks can offer and also satisfies the appetite for a moderate risk or higher risk which justifies a higher return.
7. Tell us more about your services and distinguishing features.
We act as a lending and borrowing platform for our users, offering the services of a bank, however in a decentralized manner. That means, no bureaucratic documentation procedures, no lines in front of the bank office — just one banking app that works conveniently via the internet.
We offer passive income generation, automated credit risk assessment and protection mechanism, fixed interest rates, loan provision and generous rewards for early birds. That’s what makes us who we are, and that’s how we position ourselves as truly distinct from the centrally-controlled banks.
8. Why do users need CREDI tokens?
This helps as an effective instrument for staking, reward generation, yield farming and exchange. We try to leverage it as an investment mechanism in the first place, and as our native token, it is instrumental for the maintenance of our platform and spreading rewards. In order to manage money effectively and take advantage of all platform’s features, CREDI token will be quite integral.
9. What are your plans? Will you partner with other Fintechs and financial institutions, say in Europe or the United States?
Quite possible, I never exclude this opportunity. Growing partnerships is very important, especially at the first stages of the startup, when we need to build a solid reputation. We would like to expand and become a truly global enterprise. We also want to show the world that everyone can benefit from DeFi. It will be a truly global system — not for a selected few, but for the ones who were always left behind the bar.
10. Is DeFi the future and the end of banking as we know?
I think, in a certain sense we can observe it already now. The banks are not able to handle the huge volume of assistance requests. Many people are left without any hope of restoring everything back to normal.
In this case, something else has to act as a guarantee of future prosperity, and the growing number of DeFi use cases clearly shows that people grow more inclined towards decentralized digital solutions. As the past has shown time and again, the technological advance is the only way an industry can expand and improve. This is the future and the new age.