Divine Research Offers 30K Unbacked USDC Loans via World ID

Key Takeaways:

• Divine Research has issued around 30,000 short-term unbacked crypto loans since December
• The company uses Sam Altman’s World ID platform for identity verification and preventing multiple account creation
• Interest rates range from 20-30% with a first-loan default rate of approximately 40%
• The crypto lending market is recovering with growing interest from financial institutions

Divine Research Pioneers Unbacked Crypto Lending

San Francisco-based lender Divine Research has issued around 30,000 short-term unbacked crypto loans since December, leveraging OpenAI CEO Sam Altman’s iris-scanning World ID platform to verify borrowers.

Divine offers loans under $1,000 in USDC stablecoin, primarily to international borrowers who are underserved by traditional financial systems. The company uses World ID to ensure that users cannot open multiple accounts to bypass repayment limits.

“We’re loaning to average folks like high-school teachers, fruit vendors… basically anyone with access to the internet can get access to our funds,” Divine founder Diego Estevez explained. “This is microfinance on steroids.”

High-Risk Business Model with Significant Returns

Interest rates range from 20% to 30%, with a first-loan default rate of about 40%. “High interest rates compensate for these losses,” Estevez said, adding that free World tokens issued to borrowers can be “partially” reclaimed.

Estevez noted that Divine’s lenders are everyday individuals seeking solid returns. “Anyone can provide liquidity. We’ve engineered the system such that after accounting for default rates and the interest rates on offer, providers will always make a profit.”

Growing High-Risk Crypto Lending Market

Divine is part of a growing group of high-risk crypto lenders capitalizing on renewed market momentum and political tailwinds, including support from former US President Donald Trump.

Another startup, 3Jane, recently raised $5.2 million from Paradigm and offers uncollateralized credit lines on Ethereum. Unlike Divine, 3Jane requires “verifiable proofs” of assets or income, but still no collateral.

3Jane plans to introduce AI agents that follow lending rules automatically, aiming to lower rates while enforcing repayment. Defaulted loans on its platform are sold to US debt collectors.

Other players like Wildcat cater to market makers and trading firms, offering undercollateralized loans with customizable terms. According to Wildcat adviser Evgeny Gaevoy, “In the event of a default, lenders coordinate directly among themselves to seek recourse.”

Crypto Lending Gains Institutional Attention

Lending remains a small slice of the crypto market but attracts growing attention as institutional players reenter the space. Last week, reports revealed that JPMorgan Chase is looking into crypto-backed loans, planning to lend directly against crypto assets like Bitcoin and Ether.

However, the shadow of 2022 looms large, when major crypto lenders like Celsius and Genesis collapsed. Celsius’s CEO Alex Mashinsky was sentenced to 12 years for fraud, and Genesis settled a $2 billion lawsuit.