Friktion Expands Into The Credit Market Through Under-collateralized Crypto Lending

Launched in December 2021, Solana’s premier portfolio management platform, Friktion, has been able to draw traditional and crypto-native institutions with up to $60 billion in AUM that want to receive the best risk-adjusted and transparent returns on DeFi.

The initial product of the new division, Friktion Institutional Credit, gives access to a diverse source of returns in DeFi with fixed income.

By utilizing a strong and decentralized risk management framework with institutional-grade infrastructure, Friktion hopes to take advantage of this expanding market potential as the crypto credit markets develop and the inclusion of more knowledgeable participants.

The company claimed borrowers could access undercollateralized loans through its cryptocurrency lending product. With this kind of loan, the borrower is not required to put up collateral higher than or equal to the loan’s value. As a result, it could be a capital-effective way to borrow money.

According to the company, Friktion’s crypto financing would improve lender safety. The loan product will have pools divided between junior and senior tranches.

Junior tranches will insure senior lenders against loan defaults in exchange for higher annualized rates of between 11% and 17%. To lower counterparty risks, loan pools will also include a wide group of borrowers. Lenders in the senior pool are eligible to get yearly returns of 8% to 10%.

Despite issues with DeFi lending, Friktion asserts a rising demand for institutional DeFi credit, particularly for under-collateralized stablecoin loans that provide borrowers with capital efficiency.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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