How DeFi Can Avoid the Irrelevance of P2P Lending and Crowdfunding

If you are a venue for emerging credit, the risks that come to your platform are subject to adverse selection and the lemons problem.

Not Globacap, the investment software platform, despite such a site being a strong technical and market innovation.

Nobody actually wants to do the homework of selecting Lending Club notes, which requires learning about credit risks and understanding complex financial geek jargon to pick an investment.

From the peak of 3,500 digital lender platforms, around 600 remain standing.

We have been bearish on these platforms because of the Libertarian problem.

The failures of Covestor, Motif, Kaching and other digital wealth platforms promoting a semi-active investing style in the U.S. highlights the problem.

Some of the early neobank players, like Monzo and Tandem, engaged with the crowdfunding market to raise single-digit million amounts from thousands of excited supporters.

The positive relationship between investors and users spun out into the story that crowdfunding is a successful economic arrangement, and that the crowdfunding platforms themselves will be the next generation of investment banking.

To be honest, it is sometimes confounding how Initial Coin Offerings - the next generation version of crowdfunding - were able to raise $20 billion over two years.

In p2p crowdfunding, the market is consolidating and showing limited growth economics.