Newly formed DeFi lending platform Teller has raised $1 million in a seed funding round, according to a press release published on July 16. The startup was incubated by Andreessen Horowitz’s a16z incubator. Investment was led by Framework Ventures, while other participants include Parafi Capital and Maven11 Capital.

Teller is building an algorithmic credit risk protocol for the DeFi market by aggregating data from legacy credit data systems like Equifax and migrating them to decentralized lending markets. The Teller protocol aims to reduce lending risks for investors and allow a greater number of people to launch decentralized markets for unsecured loans - thereby lowering the barrier of entry. 

Teller founder and CEO Ryan Berkun said that DeFi requires more than just liquidity mining programs,  also known as yield farming, in order to reach mainstream appeal,

Yield farming is a way for many DeFi protocols to temporarily bootstrap liquidity and generate a convection of interest...But true success for DeFi requires entering mainstream appeal; we need to stop building in a vacuum...Current proposed solutions of ‘shared credit lines’ only dilute risk, rather than create true user accountability.

The Teller protocol will be able to interact with centralized data providers and credit bureaus to calculate consumer credit risk for loans, which will help in the assessment of unsecured loans. Developers can use Teller’s credit risk algorithms to help borrowers reduce the amount of collateral required for a loan. 

Furthermore, borrowers can get better loan terms and reduce collateral requirements through voluntary credit history and KYC submissions.