How Sublime Plans to Solve Over-Collateralization in the DeFi Space


Founded by Ritik Dutta, Sublime was created to democratize access to credit through a peer-to-peer protocol.

Sublime was created after Ritik noticed that peer-to-peer lending companies from the past 20 years on Web2.0 were lacking the social component necessary to make them truly peer to peer.

Being from India, a country where informal loans still represented a majority, Ritik knew the importance of relying on trust and mutual connections to enforce informal loans. He also knew that existing social media networks would not form a sufficient foundation to facilitate his envisioned platform, so he decided to build his own. 

Once the idea was realized, a team was formed. The founding team consists of developers that have extensive experience in blockchain development and research. Through Web3.0, they set out to build a platform meant to tightly integrate the social layer and the financial infrastructure provided by Decentralized Finance (DeFi) to rebuild how credit works. 

Still a relatively small company of five employees, Sublime has now raised $2.5 million in funding and is looking to tackle over-collateralization within the DeFi ecosystem. 

How Sublime Plans to Solve Over-Collateralization

Collateralization, or using valuable assets to secure a loan, is incredibly common all throughout finance. However, one of the most significant shortcomings of the DeFi ecosystem has been the reliance on over-collateralization.

Over-collateralization is when the value of the staked asset is more than the loan amount.

One factor that leads to over-collateralization in the DeFi space is market volatility. The price of digital assets is constantly fluctuating, causing a high amount of risk for lenders, leading to the DeFi borrower facing over-collateralization. 

Ritik’s assessment of peer-to-peer lending companies from the past 20 years lacking integrated social features and genuine peer-to-peer service also applies to the Defi space and its issue with over-collateralization. 

With the idea of eliminating the collateralization problem, Ritik and his team created Sublime.

Sublime’s platform allows borrowers to tap into their social capital to access credit from lenders that trust them, thus potentially reducing the collateral requirements. Through this platform, users can delegate credit to one another without any requirement for centralization. The goal is to crowdsource credit data, so risk assessment is decentralized.

The Sublime Platform

The Sublime platform stems from a need to enforce trust and mutual connections within the DeFi loan space and reduce the costs of those borrowing. 

With this in mind, the platform was designed to allow its users to link their identities to their wallet addresses, which will allow borrowers to use their trust and reputation as leverage to gain access to credit from lenders that trust them.

On this platform, loans can exist in a pool-based structure that allows multiple lenders to fulfill a single loan or request. There is also the option to have a direct line of credit between the lender and the borrower. 

The platform also allows others to build on top of Sublime’s architecture and remove any processes some may see as unnecessary for their specific needs. 

Users can customize and build debt products suitable to them, or institutions KYC their lenders and borrowers, all the while remaining anonymous on-chain. At the same time, DAOs can publicly verify and raise debt from their community members and their supporters, this way, data is crowdsourced, and the risk assessment is decentralized.

Future Plans

Sublime’s end goal is to create a new social graph that allows borrowers to access credit without the need for a centralized scoring system. The system enables users to interact even without direct personal relationships by using mutual connections whenever present.

Before long, Ritik and his team hope to create a formation of hubs within the network that is reminiscent of banks. 

The End of Over-Collateralization?

With over-collateralization, the DeFi market is not sustainable. Innovations must occur to reduce the capital costs put on the borrows to ensure longevity within the space. Many experts within the space have voiced that a better category of DeFi loans is needed for DeFi to move forward from here. 

Luckily, companies like Sublime have taken DeFi’s most significant issue and found a viable solution.   

Sublime has raised over $2.5 million in funding from backers, including Electric Capital, Galaxy Digital, FinTech Collective, Collab+Currency, Jill Carlson Gunter, and Ryan Selkis. 

Sublime is set to launch its alpha in two weeks, starting off with a select group of users with access to their network.

With this new innovative platform, over-collateralization in the DeFi space may be a thing of the past.