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RECAP: Clearpool AMA with Little Dogs

On Wednesday, 2nd November, Jakob Kronbichler (cofounder and CCO) joined the Little Dogs community to conduct an AMA on Clearpool. Here’s a recap.

We are a private small, invite-only whale group of 200 members. Our members include Top Traders, Gem Hunters, Defi and On-chain analysis experts, HF Managers and a solid collection of CT Influencers. We are small but very tight-knit, and we invest big, we go into a project, and you can see the wicks as we enter.

Sure, my background is actually in startups. I have previously been with a firm called Rocket Internet and helped them build 2 large consumer marketplaces that both went from inception to IPO in about 5 years. I then joined the management of a Fintech firm doing Neobank and alternative lending. I got into crypto in 2017 privately, but it was really Defi summer when I got super passionate about looking at protocols like Aave and Compound. Having been in lending, I realised the massive potential of Defi and realised I had to go full-time. I met Rob and Alessio, my co-founders and started building Clearpool.

They both worked in Tradfi before; Alessio is also co-founder and CEO of Hex Trust, a larger custodian in Asia. We were constantly talking about DeFi last year and noticed a gap in the market. The original lending DeFi protocols, such as AAVE and Compound, were performing quite well. However, they only provided over-collateralized loans, which were highly capital inefficient and did not serve some of the institutions in this space that were looking for a more efficient source of capital. So this was when the idea for Clearpool emerged around the summer of last year.

As mentioned, we looked at overcollateralised players like Aave and Compound, who did something revolutionary and had awesome products. However, we realised they were capital inefficient, and hence we realised there was a gap in the market. So we came up with the idea of a protocol for unsecured lending and to build this decentralised capital market ecosystem.

The first major difference is that Clearpool is a credit marketplace with various single-borrower pools. In other lending platforms, such as Maple and TrueFi, you would fund pools for multiple borrowers, and central entities would underwrite and allocate the funds. In Clearpool, lenders visit the platform, view and compare different borrower pools, and then make their own decision on exactly which borrower pool to fund. So lenders can manage their risk more effectively.

The second is the pool’s dynamic nature. Maple, TrueFi, and some other protocols offer fixed-term loans with a fixed interest rate and term duration, whereas Clearpool offers both borrowers and lenders complete flexibility. Clearpool’s borrower pools are dynamic as they don’t have fixed pool sizes or interest rates. They are determined by the pool’s utilization rate, which means that the pool is determined purely by market forces, such as how many lenders deposit into the pool and how much liquidity the borrower withdraws. Moreover, with the Clearpool Oracles that we recently launched, the rates will theoretically always represent and update with current market conditions.

By lending to single-borrower lending pools, lenders receive real yields (USDC) from the borrowers’ interest rate, along with additional CPOOL token incentives. Clearpool considers token incentives a feature of DeFi that can be used advantageously to promote and enhance growth. However, Clearpool believes that token incentives must be emitted in a gradual, controlled, and deliberate manner, avoiding excessive inflation and earned through practical interactions with the protocol that benefit the Clearpool ecosystem as a whole. The current yields are on average 7.5% USDC + 1.5% CPOOL APR = 9% All-in.

Monthly targets for Total Liquidity Provided are set, and a budget for LP incentive rewards is established and recalibrated regularly every month. LP incentives will gradually taper off as the Clearpool ecosystem and protocol mature. Furthermore, protocol revenue will also be used to buy back CPOOL to extend or sustain LP incentive rewards in perpetuity. So we have mapped this out over several years, and the protocol’s tokenomics will gradually become deflationary, meaning CPOOL bought back via revenue > any reward emissions.

The Clearpool Oracles’ concept aims to ensure that the interest rate curves move fluidly with the constantly changing market conditions. The Clearpool Oracle network comprises leading institutional market participants known for their expertise in this field. They will vote on the three parameters that will reshape the interest rate curve every epoch — Y0 (the interest rate at 0% utilization), Y1 (the interest rate at 100% utilization), and Ym (the interest rate at optimal utilization). In the coming weeks, we will introduce new parameters such as credit risk premium (the lower a borrower rating, the higher the interest rates), pool duration and a few more. Curve gonna become a lot smarter 🧠

At the end of each voting epoch, the distribution of Oracle votes is processed mathematically, resulting in a weighted average data point which is then used to price the respective parameter for the duration of the following epoch. This recurring process will ensure that the interest rate curve is repriced to reflect current market conditions as prescribed by the consensus data points submitted by Oracles.

Clearpool is constantly speaking to many traditional financial institutions looking to enter this DeFi space, and I believe there’s a huge opportunity here. The major challenges they face are usually regulatory and compliance-focused, as most of them are regulated in the traditional world. To attract and bridge those institutions into DeFi, we have to address those issues first, so Clearpool innovated and launched permissioned pools.

The permissioned pool is fully KYB/AML-compliant to meet the regulatory needs of institutional market participants. Everyone in the permissioned ecosystem, including both borrowers and lenders, will go through the same KYC/B and due diligence onboarding process so that both parties will have complete visibility. As you mentioned, Clearpool successfully launched a permissioned pool with Jane Street, a Wall Street institution, with BlockTower Capital as the lender via Clearpool. Clearpool also recently launched permissioned pools with Alameda Research, a leading principal trading firm, with Apollo Capital and Compound Capital as the first lenders. And obviously, there will be more permissioned pools in the near future, as we are discussing pools with several high-profile traditional institutions! We’re also developing a new permissioned pool ecosystem product; more details to be announced soon! Watch this space 👀🚀

Hehe, yes, what I can say is it will be one of its kind, and we will launch it with some very reputable players. Don't wanna spoil the surprise about the exact mechanics, but it’s been developed by taking feedback from many of the largest players in the institutional space. Overall we are veryyyyy excited about this product and about our very ambitious product roadmap in general. I believe my cofounder Rob will give a more detailed update on the product roadmap in the next few days 😉

CPOOL is Clearpool’s governance and utility token, and it’s an integral part of the ecosystem. One of the main utilities for CPOOL is borrower staking. After successfully passing the onboarding process, every borrower needs to stake CPOOL to launch its liquidity pool. Clearpool has a healthy pipeline of borrowers, so there will be a constant demand for CPOOL

As I mentioned before, we recently launched the Oracles, along with the CPOOL delegated staking mechanism. CPOOL holders can now earn attractive yields while also participating in securing the interest rate pricing mechanism. We want to ensure that the Oracles provide accurate parameters that accurately reflect current market conditions. If they fail to do so or even attempt to skew the rates, they will fall in the tails of the distribution, be removed from the final distribution, and receive no rewards. As a result, anyone staking will move their stake to a more successful Oracle, and that Oracle will become less relevant. Oracles need to stake CPOOL. However, the amount they’ve staked themselves does not earn any rewards.

Overall the token accrues revenue indirectly since protocol revenue is being used to buyback the token in the market (just like with a share repurchase program). There will be some initiatives and new product launches that will significantly increase revenue and hence buybacks overall, getting us closer to truly deflationary tokenomics and, hopefully, a strong token.

Hopefully, that explains the significance of CPOOL and the importance of selecting the right Oracle to stake. Governance utilities will also be launched in the near future. The Clearpool team is working hard on a variety of product innovations that will add further utility to CPOOL. For example, Thematic Pools will offer one-click diversification for LPs looking to spread liquidity over multiple borrower pools. So keep an eye on that!

We just recently introduced the innovative Clearpool Oracle system and CPOOL staking, but we won’t stop there! The Clearpool team is currently working on the next iteration of the institutional-grade permissioned pool product, which will be unveiled soon (and also launch rather soonish). The team has also been working on final product designs for the next phase of development, which will serve as the roadmap for 2023. These innovative new products and features leverage the composability of Clearpool and will significantly broaden the product ecosystem, leading to further growth and adoption. Basically, you can think about it this way: we have so far launched a primitive with the single borrower pools with immediate withdrawals. On top of this, we are now building a lot of new features, products you would know from traditional capital markets but in a more efficient Defi way. These products will also allow us to increase revenue significantly.

As mentioned, there will be more details on this very soon! And, of course, we have plenty more borrowers lined up to launch pools as well and will keep growing Clearpool.

We are closely working with Credora, and we think their risk assessment is very thorough and well-rounded. Especially the real-time risk assessment is a big innovation, something that traditional credit rating agencies do not do. Especially during times of market distress, it’s key to have maximum transparency at any point in time.

Thanks a lot for having me! Great to be here, and please always feel free to reach out in case you have any questions!

About Clearpool

Clearpool is the first decentralized marketplace for unsecured digital asset liquidity, where institutional borrowers can create single-borrower liquidity pools and compete for uncollateralized liquidity directly from a decentralized network of lenders. Liquidity providers on Clearpool earn attractive yields, with pool interest rates enhanced by additional rewards paid in CPOOL — the protocol’s utility and governance token. Clearpool LP tokens, called cpTokens, are the building blocks for a system of tokenized credit and on-chain risk management.

Clearpool is building the architecture to facilitate flows between traditional capital markets and the burgeoning DeFi ecosystem. The protocol is backed by leading investors from both traditional venture capital and blockchain, including Sequoia Capital India, Arrington Capital, Sino Global Capital and Wintermute.

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