Financial news

In the last 12 months we have seen some of DeFi’s (once) most notable players stumble across some hurdles. From Genesis, Voyager Digital, Celsius, and BlockFi, all these companies have one thing in common – they are for crypto, and backed by crypto.

Soil, a debt marketplace, is pioneering sustainable crypto lending by bridging traditional finance (TradFi) to DeFi – ie. for crypto, backed by traditional assets.

To understand more about how Soil is ensuring crypto survives through its connections with TradFi, we spoke to Jakub Bojan, CEO and co-founder of Soil. Bojan is an experienced executive with a broad track record of business development through M&A activities, business integration, and organic growth.

Tell us more about your company and its offerings

Soil is a cutting-edge, self-balancing DeFi 2.0 platform connecting borrowers (traditional businesses) and lenders (crypto holders) in a debt marketplace. We’re making it possible for established businesses from a variety of industries to access funds by obtaining loans from stablecoin holders.

Our goal is to bring about direct crypto loans between market participants by merging a crypto loan protocol with a corporate debt marketplace. The lending feature will provide lenders (crypto investors: individuals and institutional) with secure and competitive yields backed by the cash flows generated by non-blockchain businesses. At the same time, the debt marketplace will give traditional companies and financial institutions (e.g funds) an easy and flexible way to get alternative financing.

Unlike other stablecoin lending protocols, which rely on interest rates from supply and demand or staking rewards, Soil secures its operations with the solid cash flows generated by established, non-crypto businesses.

What problem was your company set up to solve?

Soil is on a mission to make lending and borrowing in decentralised finance (DeFi) more secure and stable. Many DeFi platforms are susceptible to defaults and yield volatility during market downturns, leaving lenders and borrowers vulnerable.

Soil was built to connect traditional businesses with crypto lenders to provide alternative financing options outside of traditional corporate debt. Companies can access funds using the financial streams generated by their operations, while crypto lenders provide stability through their stablecoins. This results in loans that are not affected by the fluctuations of the crypto market, giving both parties peace of mind.

By bringing together traditional businesses and crypto lenders, Soil aims to create a debt marketplace that is protected against market volatility and unpredictability.

Please note that we solve problems that exist both in the crypto (DeFi) market and in the traditional market (TradFi).

In DeFi:

• The low and unsustainable yield on stablecoins: low crypto adoption results in a minimal number of diversified business models with long and proven track records in both bull and bear cycles. It is reflected in the low profitability of the most popular lending protocols that offer a low yield of around two per cent APY on stablecoins (effect of money market mechanism and variable market conditions). Projects that promised sky-high double digits returns either required subsidies or were based on self-printed tokens – in both cases, the bear market negatively verified their unsustainable business models.
• Fragile collaterals: the stability of most DeFi protocols is secured with fragile collaterals – mainly consisting of one class of highly-correlated assets, typically a basket of crypto tokens. It triggers a high risk of cascade liquidations that may be amplified by low transparency in protocol investment policy and the value and structure of reserve capital.

In TradFi:

From the perspective of traditional, regulated financial institutions and corporates seeking a source of capital to scale up a business, traditional finance has the following limitations:

• Rising capital (e.g, by issuing bonds) is time-consuming and expensive.
• Financial products are anachronistic and not adapted to the capital requirement of companies operating in the digital era.
• Geographical and regulation barriers limit the international expansion of financial institutions and increase their client acquisition cost.
• Inequality in access to financial products – some are only available to a narrow group of clients (corporate or wealthy clients).

Since launch, how has your company evolved?

Since the launch and the idea to build alternative sources of financing for entities operating in the traditional world, we were able to build an extremely professional and experienced team. They decided to join Soil as they were charmed by the idea of building a DeFi infrastructure connecting crypto and the traditional world of finance.

Moreover, even though we are still in the development stage (just before the launch planned for the end of 1Q2023), we were able to secure partnerships with superb private debt funds and established companies that provide us with a healthy pipeline of liquidity demand as for today exceeding $25million.

What has been the biggest challenge or most ‘tricky moment’ to overcome?

DeFi lending had a great reputation as a safe haven among the crypto market’s ups and downs, but things changed in the second quarter of 2022. The UST algorithmic stablecoin collapse, Celsius stopping withdrawals, and 3 Arrow Capital‘s troubles all led to a sharp drop in DeFi market capitalisation from $150billion to around $30billion.

Soil is entering the market during a challenging time for crypto and DeFi projects, but we see this as an opportunity to build something great. Our focus will be on earning your trust by showing you how we’re different from the rest. Our loans and interest repayments are secured by the solid cash flows generated by established businesses in the traditional finance sector. Soil is a new DeFi lending and borrowing platform that provides these companies with an alternative to traditional banking.

By connecting lenders and borrowers in this way, Soil will be less affected by crypto market volatility. Lenders will have the peace of mind that comes with knowing their loans are being repaid regularly by reliable borrowers. Plus, we’re creating a Reserve Fund to offer even more protection against unexpected events.

What are your biggest achievements or ‘proudest moment’ so far?

One of our biggest achievements was building an extremely experienced team and partnering (being still in the development stage) with Mount Private Debt Fund and Flexee App that secured us liquidity demand exceeding over $25millon.

Mount Fund is a leading investment fund in Poland and CEE region, specialising in private debt and real estate funds management. In 2021, it was ranked as the third most active lender in Southern and Eastern Europe, according to the European Direct Lender Ranking.

Mount Fund has a strong investment team with extensive experience in managing funds and originating loans, and is supported by a team of 16 professionals in operations, sales, legal, and compliance. It operates under Polish Financial Supervision Authority regulations and will be a lead generation partner for Soil, offering its services as an alternative to traditional corporate debt. The CEO of Mount Fund, Mikotaj Motz, is also a member of Soil’s team (chief investment officer) and share and tokenholder.

Flexee is a fintech company that offers a mobile app allowing employees to access their earned salary instantly, instead of waiting until the end of the month. The app tracks their rising salary and allows them to withdraw any amount they choose, making the process easy and convenient.

Flexee introduces the “salary-on-demand” service, which is gaining popularity in Europe and offers an alternative to expensive consumer loans. Based on EY estimates, there is over $1trillion of accrued pay held in employers’ treasuries in OECD countries, and over 80 per cent of employees are interested in this type of service.

How would you describe the culture of your company?

It is a startup, set up by professionals with broad entrepreneurial and business experience. So we combine typical startup culture resulting in maximum operational flexibility, informal communication, minimal hierarchy and flat organisational structure with discipline, goal orientation and professionalism and experience that we get from previous successful business undertakings.

What’s in store for the future?

To ensure the safety of the platform, reduce default risk, and provide peace of mind for risk-averse lenders, we’re planning to create a Reserve Fund. It would function similarly to Deposit Guarantee Schemes in the European banking system.

We will release the native Soil token, with economically reasonable in-built floor price mechanism, will drive the protocol’s growth and offer unique benefits for its holders.

In addition, we are planning IDO on one of the most popular launching platforms 2023, and two months prior to this we will release all the details including full investors offer. Further down the line, we are planning to list $SOIL token on decentralised and centralised exchanges.