Altitude, a Decentralized Finance (DeFi) protocol offering a first-of-its-kind actively managed collateralized loan, which uses the volatility of the value of the collateral to repay itself over time, has closed a round of funding from a number of prominent investors deeply involved in the Web3 space.
The investment will be used to support product development and build out the team as Altitude prepares for its public launch. The protocol is live on the Ethereum main net and has already issued loans worth more than 1 million USD.
Investors include a number of prominent angels in the Web3 space:
Danish Chaudhry, Batuhan Dasgin, Benedikt Schulz, Dermot O’Riordan, Evgeny Gokhberg, Fabian Wetekamp, Georgi Georgiev, Kay Meyer, Lyuben Belov, Winslow Strong, Xin Wang and many others.
Loans in the Decentralized Finance (DeFi) space are usually collateralized and a common trend amongst crypto investors is to use their crypto holdings (i.e. bitcoin, ether, etc.) as collateral and borrow against them. This enables long-term believers in crypto to both to keep their investment portfolio intact while unlocking liquidity.
The main challenge of using crypto assets as collateral is related to the notorious volatility of the crypto markets. It is considered normal for the price of bitcoin to fluctuate up and down by a large percentage in a single day. If the price decreases, the loan could become undercollateralized and ultimately liquidated.
Given the constant volatility of the crypto markets, such liquidations are not uncommon and hence borrowers need to be very careful when choosing the amount of collateral for their loans. The trade-off is the efficiency of their capital, i.e. striking a balance between how much they can borrow against their holdings vs. the likelihood of liquidation.
The second challenge with borrowing in DeFi is that interest rates can fluctuate between lending platforms, meaning that a borrower can borrow from one lending platform only to realize that the following day their rate has become significantly higher than other available rates.
This is where Altitude comes in.
Altitude itself is not a lending platform, but a protocol that manages the loans and collateral across leading platforms in the DeFi space. When someone borrows via Altitude, the protocol actively manages, both the loan and collateral in real-time, based on market conditions to optimize the loan.
How does it work?
Once someone borrows via Altitude, the protocol continuously scans the leading lending platforms for a lower interest rate and as soon as it detects one, the loan is automatically refinanced, ensuring that the borrowers are always borrowing at the lowest available rate.
On the collateral side – the protocol monitors the value of the supplied collateral, and while the loan is over collateralized, it automatically engages unutilized collateral to generate yield by deploying funds into relevant platforms providing yield. If the value of the collateral declines, the protocol automatically rebalances to maintain a healthy Loan-to-Value ratio and as the value of the collateral increases, the protocol deploys more funds to generate additional yield.
The net effect for borrowers is that the yield generated by the protocol is used to reduce their loan, in effect automatically repaying the loan over time.
As the capital is managed as a vault, individual borrowers are never exposed to the full gas fees making rebalancing across lending pools and yield platforms efficient even for small borrowers.
It is only possible to do this in a fully automated way because of the trustless, composable nature of Decentralized Finance, where Altitude is able to move funds across protocols to achieve high degrees of capital efficiency via automation. The funding will be used to expand the Altitude team to continue to develop the protocol.