Financial institutions continue to search for ways to pile into the crypto market, and decentralized finance (DeFi) products are one mechanism that could help them capture share. Investors in DeFi products can earn yield on their capital by lending out their cryptocurrency in exchange for interest.
But DeFi lending is far riskier than traditional lending, in part because of the volatility of the asset class. Just as “high-yield” bonds compensate investors with more cash for betting on riskier-than-average companies, DeFi lending can offer far higher interest rates than the traditional savings account wherein customers essentially lend their money to a bank.
Conduit is building a set of APIs that developers can use to build platforms that provide access to DeFi products. As VP of product at crypto wallet BRD, which Coinbase acquired in November last year, Conduit CEO and cofounder Kirill Gertman experienced firsthand the challenges of finding vendors that would provide the backend tools that his team needed to build its user-facing product. After a stint at Arrival Bank and half a year as product head at consumer fintech Eco, Gertman created Conduit to be the backend solution he was looking for but couldn’t find.
“When you look at the fintech side of things, there’s already a huge stack that’s been built right to support that. You have Stripe, you have Marqeta if you want to issue cards – any use case you can come up with, you have somebody with an API that’s ready to give it to you,” Gertman told TechCrunch in an interview.
Conduit aims to be a one-stop shop for neobanks and financial institutions to plug their own products into the DeFi ecosystem, which Gertman said is made easier because Conduit itself is regulated and compliant, taking the compliance burden off of companies using its tools.
For consumers to earn DeFi yields, their fiat currency is first converted into stablecoins, a type of cryptocurrency pegged to the fiat currency’s value, so it can be invested into various crypto protocols like Compound and AAVE….