Clearpool Revolutionizes DeFi Debt Capital Markets with Tokenized Credit
Early in 2021, Clearpool’s founders set out to design a protocol to solve one of the most significant pain points for borrowers in DeFi — overcollateralization. Over the last six months, the Clearpool team has worked tirelessly, day and night, to take this idea and turn it into a reality. Today we are pleased to present this reality to you.
More Than a Lending and Borrowing Protocol
Solving overcollateralization in the DeFi lending and borrowing space was important, but we did not want to stop there. Clearpool is more than a lending and borrowing protocol; it is a decentralized capital markets ecosystem. Clearpool is revolutionizing debt capital markets with the introduction of tokenized credit.
In TradFi, the credit market, or bond market as it is more commonly known, is somewhere in the region of $123 trillion in total size. It’s a huge market, and it’s where corporations, financial institutions, supranational entities, and governments all borrow money from investors with varying degrees of risk appetite who are looking for yield.
When investors lend to these institutions, they take on the counterparty risk of the specific borrower that they lend to. In TradFi, various products allow the lender to manage and hedge that risk.
Creating a Decentralized Capital Markets Ecosystem
Clearpool takes the core concepts of the traditional credit market and applies the principles of decentralization to create a decentralized capital markets ecosystem built on Ethereum.
Uncollateralized DeFi Liquidity
On Clearpool, institutional borrowers can open individualized single borrower liquidity pools and compete for uncollateralized liquidity directly from liquidity providers in the DeFi ecosystem.
Liquidity providers, in turn, get the opportunity to earn attractive rewards for providing liquidity to borrowers. LPs also earn additional rewards on Clearpool simply for being an LP, making Clearpool APYs super attractive.
As in the traditional market, LPs on Clearpool are exposed to the counterparty risk of the borrower, so it’s vital to provide powerful risk management tools to them to manage this risk.
When an LP provides liquidity to a Clearpool they will receive cpTokens in return. cpTokens represent the amount of liquidity that has been supplied and accrue the interest rate and LP rewards for that pool. Interest is paid in the currency of the pool whereas LP rewards are paid in CPOOL — Clearpool’s governance token. cpTokens also represent the amount of risk that the lender has taken on by funding the borrower.
As with bonds in the traditional market, cpTokens will be tradable in a secondary market, where LPs can reduce or eliminate their exposure by trading the risk. New LPs looking to gain exposure to the risk/reward profile of certain borrowers can also buy cpTokens in the secondary market.
Emergent Properties of cpTokens
cpTokens open up a world of possibilities for LPs to further trade, manage, and hedge risk. Clearpool is developing additional credit derivative products and a dedicated trading venue specifically for cpTokens — watch this space!
The Road Ahead
Over the coming weeks, we will be announcing the dates and venues for our public token sale, where you will be able to become the very first members of the Clearpool community. We will also announce CEX and DEX listing dates and venues soon.