Clearpool Is The Defi Protocol That Traditional Lenders Fear

Clearpool protocol is a decentralized financial infrastructure that enables individuals to take part in borrowing and lending at rates that would seem impossible a few year ago.

When the concept of decentralized finance took it’s turn in the limelight, many people were still unable to grasp what exactly was DEFI.

The world has been operating under a centralized financial system for as long as anyone can remember. So deeply entrenched were we in this system that the structure of Defi itself can really resemble a scam.

And if by the odd chance that someone found Defi to be a legitimate concept, the next question was: How does it benefit me?

Centralized finance is a tradition that is still closely guarded everywhere as nations rightfully fear the chaos that a decentralized system can potentially create in an already well-oiled economy. And financial institutions like banks have all the incentives to retain this system so that they can continue to borrow and lend in an arena where mouth-watering profits are almost guaranteed.

We have been constantly complaining sarcastically about the next-to-zero interest rates we get rewarded with for our deposits with the bank. This for example, is a channel for low cost financing for banks, and they turn around to loan us back our own money via products like credit cards at 20% interest!

For the longest time, consumers have been running about this financial round-about with little to no alternatives. The introduction of decentralized finance is set to dramatically change this financial landscape.

Because borrowing low and lending high is no longer a privileged enjoyed exclusively by men in suits sitting in a corporate board room. The average consumer can now tap on the same types of deals that banks have access to.

Would you like 20% interest on your excess funds? When you compare it with the measly sum that you get with a traditional bank, the better option would seem obvious. But of course with Defi still in it’s infancy, there is a high risk of losing your savings too!

Just like when the internet first starting being used for commerce, it was very risky to make transactions online. There was always the fear of having your credit card details intercepted and become the victim of fraud. That was the macro reason why Paypal became so big. These days we buy things with credit cards online without even blinking.

In the same line of thought, the early stages of defi can be a risky affair for many. Just take a look at the various high profile exploits where hackers were able to siphon millions of dollars from exchanges. The silver lining is that unlike the internet when it first went mainstream, there is now cutting edge technology and the brightest minds in technology working on patches and security.

Many of these innovators truly believe it in the decentralized world with every cell in their bodies. And want to make it safe for everyone to be a part of.

Clearpool has a team that is taking on this challenge head-on. And they are very probably the first-to-market with a product like this. They are bringing the conceptual benefits of defi into every home. At least that’s what their vision is.

The basic idea behind Clearpool is that any individual would be able to access high annual percentage rate (APR) returns on their money by lending to reputable borrowers. Since 1 person would unlikely have enough funds to interest huge borrowers, people would pool together their funds to catch the attention of the latter.

To ensure that borrowers are credible and unlikely to run away with the borrowed money, the community would play a huge role in assessing the creditworthiness of borrowers. This is one utility which would be anchored to the CPOOL token. Once a borrower is approved by the community, it would be whitelisted and be able to borrow from the liquidity pools.

This evolution of decentralized financing is inevitable every since blockchain came to the fore some years back. The surprise to me is who it took so long!

Before you start cheering like you’ve just won the Olympic Gold, be mindful that Clearpool operations are the first of it’s kind as far as I know. So road bumps are fully expected on the road to mass-adoption.

There is a somewhat similar startup in Credifi that is also attempting to bridge TradFi with DeFi. They of course, have different visions and approaches on how to achieve this. One thing that popped up was that Skynet Trading has invested in both Clearpool and Credifi. And both of them are partnered up with Lithium Finance which has a stellar line-up of investors themselves.

From observation, the good thing is that the team led by Robert Alcorn seems to be taking on the bull by it’s horns. Key team members are constantly making themselves available for AMAs and addressing concerns raised by the community. This is essential to harness a sense of calm and help people understand what exactly they are building.

Well investors seems to understand it perfectly as the project potential has attracted major venture capitalist such as Sequoia, Arrington XRP and Hashkey just to name a few. These affiliations with extensive networks to tap on can be key to getting big borrowers on board.

Something interesting is that Sequoia invested via it’s Indian branch. My guess is that the regulations are more suitable there due to the nature of Clearpool’s business.

Key factors for success

The idea is simple enough. It is the infrastructure and getting borrowers onboarded that is the real challenge.

The testnet will go live in December 2021 and the mainnet would go online in Q1 2022.

Significantly, Clearpool has already signed up several borrowers every-ready to dip their fingers into the pool of funds. These include the well-known market maker Wintermute, Nibbio, and Folkvang, etc.

Because there are currently no direct competitors to Clearpool, the team would have a little breathing space in terms of speed to market. This means that they would have time to refine the protocol in the initial stages of launch and after.

Security is understandably a top concern for operations like these. And I would say that Clearpool would be in the cross-hairs of hackers from the get-go. So this has to be given the highest priority over everything else.

While I have little doubt that the good people at Clearpool would be thinking the same, I have noted that from the AMA transcripts I have read, there is very little being said about this aspect. Conversations are almost always dominated by marketing news, roadmaps, big partnerships, huge APRs and staking rewards.

Speaking about staking rewards, Clearpool has run very attractive staking rewards from the moment trading for CPOOL went live on Kucoin and AscendEX. The annual yield at Kucoin for example is at a whopping 100%!

The extent to which Clearpool is nudging traders to hold via staking makes me suspect that a lot of vested tokens are being unlocked during this period from Q4 2021 to Q1 2022. So at least they are proactive in protecting new investors of the CPOOL token. It could also very well be that they are just being generous. I don’t know.

If everything goes according to plan, Clearpool is set to be a major force to be reckoned with in the DeFi space.

2021 has also seen the rise of alternative networks that compete directly with Ethereum. Even though the biggest disrupter, namely Binance Smart Chain, is built on top of Ethereum, heavily backed players such as Solana and Cosmos are growing their ecosystems at breakneck speed.

As more assets are held in these alternative chains, it is essential for Clearpool to find or build a bridge that can easily port assets from chain to chain.

If they don’t address this in a timely manner, this very factor can be the differentiator that a direct competitor leverages on to take on and overtake Clearpool.

What price can CPOOL token reach?

Even though there is no direct comparison to the nature of Clearpool’s operations, I classify it as a yield farm in the form of Aave and Compound just to name a couple.

The mechanisms and processes behind how they achieve results would obviously differ. But the reason why users get onboard would be very similar. To make their money work harder for them.

As a flag bearer in this space, Aave currently has a total value lock of approximately $13b to $14b. With a total market cap of about $3.5b worth of Aave tokens.

Here is a table of some players in this space and the ratio of full market cap to total value lock (TVL)

Aave Compound Yearn Curve
0.27 0.22 0.19 0.71

If Clearpool can match that value lock of Aave, the price of CPOOL tokens might hit $3.50.

The thing is that as more and more big borrowers get onboarded and max out their limits, it could quickly hit that ceiling. And the team has already demonstrated that they are more than capable of convincing borrowers to commit. The problem it seems, and this is the elephant in the room, is whether they would be able to convince people to get involved in their pools as lenders.

No point having buyers online if you have nothing to sell.

Saying that, this is still at a very youthful stage. And with so many prolific backers involved, I would not bet against the success of Clearpool.

If a platform is offering 50% better returns for example, it doesn’t take a genius to figure out what is the savvy thing to do. The ONE big issue stopping people from shifting their funds would be the legitimate concern of security. Are the funds going to be safe?

As of now, the registered borrowers on the upcoming platform and their projected starting borrowing amount is as below.

Wintermute $50m
Aurus $20m
Folkvang $1m – $25m
Amber $50m
Nibbio $5m – $30m
Fintech Blockchain Group (FBG) $20m

As mainnet comes online and borrowing becomes more active, we could see the limited supply of circulating CPOOL really ignite a big price push.

If Clearpool concept and business model fails to take off, it can easily get stuck in a “small player” bracket and hover around the $0.35 – $0.50 range indefinitely.