The transparent, composable and deterministic nature of blockchains makes it a perfect infrastructure for credit markets. We believe it is inevitable credit markets flow onchain, but to do so the market must mature. In aggregate what we refer to as onchain credit (LRTs, LSTs, stablecoins and private credit) have accumulated well over $300b of TVL, though this is a drop in the bucket for the 300t$ global credit market which will flow onchain in the coming decades.
As onchain markets matures and seeks to onboard larger pockets of institutional capital, a missing piece of the puzzle is risk management and it’s supporting market infrastructure. In traditional finance, central bank swap lines are deployed to buffer liquidity shocks and within offchain credit markets, investors can leverage risk management tools like Credit Default Swap to hedge their credit risks. In crypto, no instruments exists to manage default, illiquidity or slippage risks, despite risk management being the second biggest cost driver in TradFi. For onchain capital markets to truly be the future, it needs best in class risk management tooling, this is why we built Cork.
