Carapace Raises $2.5M From NFX and Others to Make Crypto Lending Safer with their Credit Risk Management Solution

Carapace, a protocol to connect buyers and sellers of protection against default risk for under-collateralized DeFi loans, today announced $2.5M in funding to its development company Starlings Lab and the launch of its test version. The funding led by NFX will enable Carapace to scale its protocol from test phase to fully operational by the end of the year.

The Problem: Currently Lack of Protection for Lenders of under-collateralized Loans

Cryptocurrency lenders today face risk of borrower default while funding under-collateralized crypto loans. As the DeFi lending market continues to grow, several primitives will need to be built to support the growth of under-collateralized loans. Carapace is building one such core DeFi primitive to make the industry more mature, more capital efficient, and to increase access amongst a diversified range of investors.

“Crypto loans are growing at an incredible pace, from a nominal amount to reach an expected $44B by 2030,” explained Morgan Beller, General Partner at NFX. “With very little protection for lenders of under-collateralized loans, Carapace’s protocol will provide a key piece of infrastructure that DeFi will need to grow.”

Carapace’s Solution: A Protocol to Make DeFi Lending Safer

Carapace’s protocol solves this by permitting lenders on DeFi lending markets to purchase protection against default in order to hedge their default risk. Carapace will allow sellers - investors seeking yield who believe that the underlying loans are safe - to provide such default protection. Pricing of risk fluctuates with supply and demand in a system where protection sellers provide capital for risk protection in exchange for a premium. If a default event occurs, a payout is made to protection buyers.

Carapace’s initial pool will be built on the leading credit protocol, Goldfinch, and will initially be closed to users in the United States and certain other jurisdictions. Carapace has partnered with the Goldfinch team for its initial launch. “I first heard about Carapace about a year back after meeting Tai at a hackathon. I believe the project has great potential and will be really useful for the Goldfinch community” stated Blake West, Co-Founder of Goldfinch.

“The current bear market for crypto has forced participants to be more aware of the return-risk tradeoff on their investments” explained Rohit Sabnis, Co-Founder of Carapace. “We help investors understand and mitigate credit risk on their DeFi loans"

Rohit and Tai met through the South Park Commons programme, which is a community of builders based in San Francisco. While all interactions remained remote due to COVID, they both really enjoyed their conversations together despite coming from different backgrounds. Rohit is based in the US and comes from a TradFi background with stints at ANZ bank and Uber. Tai, based in Japan, is a crypto-native who has built various projects in DeFi including Asia’s first mobile DeFi wallet.

To learn more and try Carapace’s test app, please visit: www.carapace.finance.

About Carapace

Carapace is building a protocol for decentralized protection against default risk in unsecured crypto loans. Created by Taisuke Mino and Rohit Sabnis, the company’s protocol is initially working with Goldfinch - a leading crypto credit provider - and will onboard several more lending protocols in the coming months. Backed by NFX, learn more at www.carapace.finance.

About NFX

NFX is the world’s largest venture firm dedicated exclusively to pre-seed and seed stage companies. The firm is based in San Francisco, CA and Herzlia, Israel, and invests in network-effects driven startups. Founded by entrepreneurs who built 10 companies with more than $10 billion in exits across multiple industries and regions, NFX is transforming how true innovators are funded. Learn more at www.nfx.com

Contact Information

Rohit Sabnis

CEO and Co-Founder

Carapace

Rohit@carapace.finance