Teller Finance is a blockchain lending application that uses novel open source credit risk algorithms to provide unsecured lending services. The Teller protocol can interoperate with centralized data providers and credit institutions, and use this to calculate the consumer credit risk of loans.
Written by: Ben Noble, Head of Communications, Teller Finance
Compiler: Zhang Gaijuan
One of the biggest challenges in the DeFi field is to transfer trust from traditional financial institutions or centralized institutions to the decentralized field. Although to a certain extent encrypted assets pose a threat to traditional financial institutions, since these institutions have been deeply rooted in society, it is unlikely that we will transition to a trustless and creditless environment overnight.
Cryptocurrency lending is a very important part of the DeFi ecosystem. However, since there is no formal and sound credit system, it is still in its infancy. The pain points are the complicated lending process , the need for over-collateralization , and the user-friendly experience. Capital efficiency is low, and more funds must be locked in to balance the risks of trustless transactions.
Although DeFi has developed rapidly in the past few months, with a total lock-up volume exceeding the $10 billion mark, DeFi has not penetrated the global $215 trillion lending market , and this is the huge growth space for the decentralized lending market.
In this context, some blockchain projects continue to explore, are committed to connecting traditional finance and DeFi, and become a bridge between CeFi and DeFi. Teller Finance, a decentralized lending project, is one of them. Teller is ready to provide users with unsecured lending services while opening up the connection between traditional finance and the DeFi world. Teller’s unsecured lending service will be launched in October this year.
What kind of loan project is Teller Finance?
Teller Finance is a blockchain lending application that uses novel open source credit risk algorithms to provide unsecured lending services. The Teller protocol can interoperate with centralized data providers and credit institutions, and use this to calculate the consumer credit risk of loans.
The agreement provides a solution for encrypted lending by combining smart contracts and centralized data. Specifically, Teller hopes to provide lending services through the collaboration between banks and blockchains, and plans to provide corresponding lending services in a decentralized world based on transaction data in a centralized environment.
The Teller white paper shows that Teller operates through a distributed cloud node network that is interoperable with the Ethereum blockchain. The nodes of the agreement act as validators, and each validator runs on a cloud-based infrastructure, such as Amazon Cloud Computing Service (AWS) and Google Cloud Platform (GCP). Teller’s infrastructure allows it to connect with other external or centralized data providers. In other words, Teller’s network or “distributed cloud” acts as a data router for protocol smart contracts.
As for data privacy issues, the agreement mainly retrieves user data through data providers listed in the Teller whitelist. User data sources include but are not limited to information such as bank transactions, credit reports, and income . Users who interact with Teller’s data providers have primary control over their data and can choose to share specific data through an API-based third-party data transmission network that interoperates with the protocol.
After the user data is retrieved, the data provider will encrypt the signature and return it to the user. After that, the data provider stores each user’s account access tokens in their respective Ethereum wallets. In future iterations of the protocol, Teller verifiers will use both secure enclave and zk-Snark zero-knowledge proof technology to further protect data privacy.
After that, the verifier of the agreement will analyze the cloud data based on the open source credit risk algorithm.
Teller’s open source credit risk algorithm (Credit Risk Algorithms, referred to as CRA) is the basis for managing the liquidity pool of the agreement. The liquidity pool of this agreement is also known as Autonomous Teller Markets (ATMs). CRA will interact with users’ credit and bank data through Teller’s distributed cloud network to assess default risks and generate loan terms based on credit ratings .
The logic flow of Teller’s open source credit risk algorithm
The generated loan terms will be submitted to the consensus contract on the Ethereum blockchain. If a consensus is reached, that is, more than 2/3 of the validators agree to the clause, the agreement will automatically initiate the loan.
Teller was incubated by a16z’s crypto startup school. In July, it completed a $1 million seed round led by Framework Labs, a DeFi-focused venture capital firm, with Parafi Capital and Maven11 Capital also participating.
Teller predicts that although Rome was not built in a day, the establishment and governance of decentralized credit institutions may one day weaken the dominance of centralized trusts.
How to use Teller for unsecured loans
Visit Teller.Finance to connect to the wallet.
Choose borrowing preferences. In the lending function, there are two types of lending for users to choose, namely unsecured lending and mortgage lending. If you want to apply for an unsecured loan, you need to connect to a bank account, which will enable Teller to bridge from centralized financial data to the future credit risk agreement.
Choose the loan size, duration, collateral type and percentage, and connect the bank account.
- Log in after connecting your bank account. Teller will grant access rights, which will enable the transfer of information between the protocol and the Teller application.
- Teller will review loan terms and automatically calculate loan interest rates based on its open source credit risk algorithm.
- After the user accepts the above terms, Teller will formally establish an Ethereum smart contract. The user needs to enter the mortgage amount corresponding to the loan terms. If the loan is applied for without mortgage, the mortgage amount is 0. Then select “request loan”.
- After completing the above steps, you can return to the dashboard to track the loan status and make payments.
