No Liquidations As Long As Repayments Are Timely
Teller, a decentralized order-book-based lending protocol, will soon launch its V2 iteration to the public, offering fixed-term loans without the risk of liquidation due to falling prices.
On March 23, Teller detailed the key features of its V2 protocol, emphasizing its focus on time rather than price-based liquidations. Time-based liquidations mean that borrowers will lose their collateral only if they fail to make repayments on time.
By contrast, most DeFi borrowers risk price-based liquidations and must ensure that the value of their collateral assets always exceeds the value of their loans to avoid getting wiped out.
And while most DeFi lending protocols only support a small number of assets for borrowing or as collateral for loans, Teller says its V2 iteration can support ERC-20 token or NFT as collateral.
On-chain Credit Scores
Teller’s users can compile “a history of on-chain credit through loan repayments and defaults” on its platform. Teller has partnered with on-chain credit protocols Cred, Masa, and Spectral, which monitor users’ lending and borrowing activity.
Users that default on their loans will have their collateral seized, and the transaction will negatively impact their on-chain credit score. Loans enter into default when a borrower fails to make a scheduled repayment before its due date and grace period have elapsed.
Teller V2 is currently only available to selected community members, including members of OlympusDAO — a DeFi protocol Teller recently partnered with.
Monetizing Illiquid NFTs
On Sunday, Teller said time-based liquidations could benefit long-term holders of illiquid NFTs by removing the need for borrowers to constantly monitor the price of their collateral.
“Awash in illiquid Jpegs you can’t afford to sell? Need liquidity for the next degen play?” Teller tweeted. “Time-based (instead of price-based) liquidation means no surprises.”
Teller also provides opportunities for liquidity providers to earn yield by offering loan terms or accepting offers from prospective borrowers. LPs can also choose to automatically supply loan requests from borrowers meeting particular on-chain reputational criteria.
Teller launched on Ethereum in April 2021. The protocol initially focused on unsecured lending and enabling decentralized credit risk assessment. It expanded to Polygon in August 2021 to offer its users a low-cost alternative to the then-congested Ethereum network, migrating 2,200 NFTs worth more than $15M at the time.
Teller also launched Ape Now, Pay Later in July 2022, enabling users to buy NFTs with a 25% to 50% down payment and to pay off the remainder via a loan.
