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By Lantern Finance
To expand Lantern’s infrastructure to enable clients to borrow USD & stablecoins against their XLM.
Lantern will revolutionize how XLM holders leverage their assets, offering a seamless path to liquidity without selling. We will do this by expanding our existing product suite to include XLM as a collateral option for clients looking to borrow USD or stablecoins. Today, there are limited options available for XLM holders to easily use their tokens as collateral for a USD or stablecoin loan. Previous crypto lenders like BlockFi and Celsius have since gone bankrupt or are no longer operational. This implosion stemmed from a slew of risky institutional lending between these companies, which eventually took the retail lending space down with it. While there are DeFi options, these aren't ideal for many investors who are risk averse and not tech-savvy given the tax and compliance headaches, multiple layers of smart contract risk, and sub-par user experience.
A collateralized loan from Lantern will allow XLM holders to get access to dollars without having to sell their assets. This way, investors can retain upside if they are bullish on the value of XLM long-term, as well as defer capital gains taxes. In return, Lantern will custody the clients' XLM collateral in our BitGo cold storage wallets (insured up to $250MM), which will be used to cover any potential loan losses should the price of XLM fall drastically. Our loans are over-collateralized (typically around a 25-40% loan-to-value at origination), which gives Lantern ample time to allow clients to address margin calls, as well as protect the Company from losses. USD loans enter margin call once they hit a 60% LTV and will have some of their collateral force-liquidated once the loan hits 70% LTV.
Unlike previous crypto lenders like BlockFi and Celsius, Lantern will not be engaging in undercollateralized institutional lending with our clients’ crypto collateral. Previous platforms commingled client funds with other tokens on hand, which exposed their clients’ balances to outsized counterparty risk. Our product is designed to keep client collateral in a designated wallet for the life of the loan and will only be touched should the loan trigger liquidation or repayment of the loan.
Our ideal customer profile (ICP) are urban professionals usually in finance, consulting, tech, between ages of 25-45. They tend to be higher net worth with ~25-50% of their portfolio in crypto holdings, including XLM. They are finance-savvy but risk averse and uncomfortable navigating DeFi applications.
If accepted into the Stellar Community Fund program, we will use the funds to build out the necessary infrastructure required to accept XLM as collateral for USD loans, including the auto-liquidation functionality which is critical to protect Lantern from defaulting borrowers. Any residual funds will be used to help fund the loans requested by our clients. As we continue to expand our product offering, we hope to become the most trusted and primary lending of choice for XLM users looking to borrow dollars against their holdings.
$48.5K
Jung Won Kim
No other submissions.