The innovative loan, between Electric Capital and a prominent proprietary trading firm, comes ahead of Trident Digital‘s launch of its Lending Conduit product. The loans were booked and managed via Membrane Labs SOC2 certified loan management system with which Trident partnered in 2023.
This Proof-Of-Concept transaction opens the door for a new form of lending that Trident believes will become the digital asset standard. Their approach draws from traditional finance risk management while adjusting for the nuances of the digital asset market.
“Post Genesis there is little investor appetite for unsecured lending, demand for over-collateralized borrowing, or independent infrastructure available to facilitate bilateral undercollateralized lending on multiple platforms. At its peak the lending market was at $80bn – this creates an incredible opportunity to rebuild the market confidence using appropriate risk and liquidity management approach and Trident is up for the challenge,” said John Wu, President of Ava Labs.
The first-of-its-kind, undercollateralized loan was executed between market leaders in the crypto space. Electric Capital (over $1bn committed capital) lent AVAX to a proprietary trading firm with over $500mm in AUM, which was provided with 4x leverage. Trident has onboarded with Cumberland‘s OTC desk, as well as Wintermute’s, in order for them to facilitate liquidations, if necessary. Loan booking and management was handled via Membrane Labs’ Loan Management System while Trident rolled out the first risk and liquidity management endeavor in the lending space.
“Trident’s approach to security and risk management gave us confidence to lend our assets. Their strategy will help unfreeze the lending market,” expressed Jim Bai, Investor & Trader at Electric Capital.
“The choice of loan management system, counterparties, loan denomination and collateral ratio were given great consideration. For our product to work we needed the terms to be commercial, the counterparties to be real, and the token to be in demand. While BTC and ETH are relatively available, our conduit will focus on lending alt coins so AVAX was a great choice for what we are trying to achieve,” stated Anthony DeMartino, Co-Founder and CEO of Trident.
Trident’s lending conduit structure allows Institutions to engage in loans where both sides have full transparency on the risks being taken. Trident will manage and execute the provisions of the loan as well as diligently monitor the risks and liquidity of the assets backing the loans and will execute liquidations as required.
Trident and Membrane agreed to terms on a partnership where Trident Digital will use Membrane’s Soc 2 certified infrastructure to offer the first of its kind lending solution. Trident’s “Lending Conduit” will allow Institutional lenders and borrowers to connect on appropriate risk adjusted returns. There will be no commingling of loans and no cross contagion risks as the firm seeks to minimize counterparty risk. Trident’s offering also looks to optimize security and transparency for the lenders and offer capital efficiency for the borrowers. The goal is to unlock billions of tokens sitting on lenders’ balance sheets who no longer have the infrastructure to lend their tokens on the proper risk adjusted terms.
“We believe that getting liquidity back to the spot market, specifically in altcoins, will allow for the market to grow on a healthy foundation. This foundation will have spillover benefits for derivatives and DeFi,” voiced Anthony DeMartino, Co-Founder and CEO of Trident.
“Our decision to partner with Membrane was simple, their best in class technology, deep crypto native relationships and their SOC2 certification allows Trident to bring its solution to the market 1 year faster than anticipated,” stated Dr. Amir Sadr, CRO and Head of Product of Trident.
“As the ecosystem bounces back and the appetite for lending returns, Trident is leading the revolution for safe leverage with their novel Lending Conduit structure, built on top of the Membrane platform. Our partnership enables market participants to securely access leverage in a capital efficient way with funds remaining on exchange where it can be usefully deployed,” said Carson Cook, Founder and CEO of Membrane.
With the first Proof-Of-Concept loan executed, Trident will focus on adding additional exchanges, onboarding more large institutional clients and adding derivatives to the platform. Trident is also working with off exchange solution providers to further reduce the risks to our lending platform.
