Why lending?
In crypto, lending is often conflated with speculative leverage trading. Outside of finance, lending is widely vilified as predatory rather than recognized as a catalyst for economic growth. But history tells a different story—societies that innovated in credit consistently outpaced those that didn’t. The role of credit is underscored throughout periods of economic prosperity, from the 17th century Dutch bond markets that transformed a small nation into a global power to the syndicated loan markets of today that finance corporate expansion. We built Loopscale because we recognize that credit is a chief engine for economic progress. We also recognize the evolution of money and credit follow parallel paths. The explosive growth in stablecoin usage signals a consensus forming around internet-native money as the future of value transfer. As money becomes borderless and instant, it’s clear that credit belongs on these same rails, pairing programmable money with programmable risk to create a new and better financial system. If the promise of Solana is Internet Capital Markets, the promise of Loopscale is Internet Credit Markets.Out with the old…
The first wave of DeFi lending protocols—multi-asset pools with algorithmic risk management— were designed at a time when builders were limited by Ethereum’s constraints and demand for onchain credit was uncertain. While they successfully proved the tremendous demand for permissionless borrowing, the structural flaws of the pool model are materializing as crypto matures:- Capital inefficiency: Algorithmic risk pricing fails to efficiently allocate capital, leaving significant funds idle. This idle liquidity creates an inherent rate spread that dilutes returns.
- Innovation bottlenecks: Adding new assets requires lengthy governance votes and significant initial liquidity, creating high barriers to entry for new or novel assets.
- Systemic risk: In multi-asset pools, interest rates are set independent of collateral. Because asset terms such as LTV ratios and interest rates must accommodate the riskiest asset, safer assets face artificial restrictions on capital efficiency.
…In with the new
Today, Loopscale introduces a new modular lending infrastructure that both solves these issues and unlocks entirely new financial products and markets. The foundation of the Loopscale protocol is a powerful order book matching borrowers and lenders directly across parameters like rate, collateral type, LTV, payment schedule, and default conditions. The design of the protocol is conceptually simple, creating a flexible foundation that enables new, powerful applications. However, while the flexibility of order books offer superior capital efficiency and risk isolation, they’ve historically struggled with fragmentation and complexity. Our interface intentionally simplifies the borrowing and lending experience while preserving the scalability and flexibility of the core protocol. Lenders can efficiently deploy capital across multiple markets, and borrowers gain immediate access to liquidity without navigating complex order books. By reimagining lending from first principles, Loopscale enables:- Markets for the next generation of digital assets. Flexible market infrastructure supports sophisticated assets like liquidity positions, staked tokens, and cross-protocol positions. When willing counterparties exist, markets can form without risk of cross-asset contagion.
- Precise risk management. Isolated collateral and flexible parameters eliminate systemic risk and one-size-fits-all exposure.
- Lend rate = borrow rate. Direct matching eliminates the liquidity requirements present in pool models, closing the rate spread to improve lending yields and reduce borrowing costs.
- Predictable costs and yield. Fixed-rate, fixed-duration loans create predictability for borrowers and lenders.