Peer-to-peer (P2P) lending protocol RociFi Labs has completed a $2.7 million seed funding round that included the participation of Arrington Capital, Goldentree, Nexo, LD Capital and Skynet Trading.
The anonymous nature of crypto means DeFi lending protocols typically use overcollateralized loans in which, for example, a borrower puts up $150 in collateral for a $100 loan. The setup is closer to a pawnshop than a traditional bank. RociFi will instead offer zero- to undercollateralized loans by using a borrower’s established DeFi presence to help lenders judge creditworthiness.
The capital will be used to expand the RociFi team and take the product to market with a full-scale launch expected in the second quarter.
“The biggest thing is being able to get the protocol to mainnet, but do it in a safe manner,” RociFi Labs CEO Christopher Brookins told CoinDesk in an interview. “We’re allocating the appropriate resources to make sure we’re not just spinning up a new protocol as fast as possible, which requires capital.”
Read more: DeFi Lending: 3 Major Risks to Know
How it works
The RociFi protocol leverages on-chain data, machine learning and decentralized identity data points, including Twitter and GitHub accounts, decentralized autonomous organization (DAO) participation and non-fungible token (NFT) ownership. RociFi relies on decentralized identity providers that use technology such as zero-knowledge proofs to only share pertinent user information.
Borrowers are assigned a non-fungible credit score (NFCS) ranging from 1 to 10 with lower scores representing lower risk. Users can burn the nontransferrable NFCS token and associated addresses at any time if they’re concerned about privacy or no longer want to use it.
“Undercollateralized capital markets represent one of the biggest opportunities to transform capital efficiency in crypto,” said Arrington Capital Partner Ninor Mansor in a press release. “The distinct lack of non-economic recourse in DeFi means other types of ‘social capital’ cannot be deployed by borrowers. RociFi changes the game, introducing the idea of on-chain credit scoring as well as NFT-based identity.”
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