A Look at Under-Collateralized Lending Protocols

Smart contract technology has enabled the development of several financial primitives in the DeFi space, one of the key pillars being lending and borrowing marketplaces. While the space has been dominated by DeFi protocols and platforms supporting over-collateralized lending, we have observed the emergence and growth of under-collateralized lending over the past year.

This research piece will examine the overall state of under-collateralized lending marketplaces in the DeFi space, with a focus on a few platforms with significant market shares. The impact of the recent CeFi lending defaults and deleveraging events on the DeFi under-collateralized lending ecosystem will also be discussed.