Friktion launches Institutional Credit

4 min readNov 6, 2022
Friktion launches Institutional Credit
  • Friktion, Solana’s leading portfolio management platform, expands into the credit market through Undercollateralized Lending for Institutions
  • Friktion Institutional Credit caters to the strong and increasing demand from institutions for higher yield products, while ensuring that transparent and robust risk management systems are in place
  • Friktion has amassed over 17,000 users and traded >$3 billion in volume across 25+ assets, with $30 million in Total Value Locked

Enabling Institutions to access the best of DeFi

Friktion, Solana’s leading portfolio management platform, has successfully attracted crypto-native and traditional institutions managing up to $60 billion in AUM who seek to access leading risk-adjusted and transparent yields on DeFi. Friktion Institutional is a new arm of the protocol aimed to accelerate the momentum of institutions adopting DeFi infrastructure and portfolio management.

Friktion Institutional Credit, the new division’s first product, unlocks access to a diversified source of return in DeFi with fixed income. As the crypto credit markets mature alongside the addition of more sophisticated participants, Friktion aims to capitalize on this burgeoning market opportunity by leveraging a robust and decentralized risk management framework with institutional-grade infrastructure.

“It is evident that there is a growing demand for institutional crypto credit. In order for the market to mature, however, there needs to be a more sophisticated solution that offers a robust yet transparent infrastructure for institutions — with an emphasis on lender seniority, clear credit underwriting standards and risk management.”

- Ken Chia, Head of Friktion Institutional

Friktion Institutional Credit fills the gap in the crypto lending market

The total crypto lending market is still in its infancy stages, comprising <0.01% of the global debt market valued at $123 trillion (as of June 2022). The current solutions offered by both centralized (”CeFi”) and decentralized (”DeFi”) platforms present inherent trade-offs.

CeFi lending platforms provided capital efficiency by providing undercollateralized loans to borrowers. However, risk management standards and transparency vary between platforms, which in some cases have led to large write-offs and bankruptcies of these platforms.

On the other hand, DeFi lending protocols democratized access to credit to anyone with an Internet connection and a wallet address. The overwhelming majority of DeFi debt markets today are overcollateralized, requiring borrowers to put up more collateral than they seek to borrow. For institutional participants seeking capital efficiency, this presents a significant barrier to participating in the DeFi ecosystem.

In an environment where overcollateralized DeFi lending yields remain compressed, there is a rising demand for smarter risk-adjusted yields in the undercollateralized credit space with institutional-grade structures, reporting, and risk-management.

A new crypto primitive for fixed rate, fixed term undercollateralized lending

Key Features of Friktion Credit:

  • Enhanced lender protection: loan pools are tranched and priced by the market, with junior tranches receiving higher returns in return for providing default protection to senior lenders
  • Borrower diversification: loan pools comprise of multiple borrowers to reduce counterparty risks
  • Risk management: transparent and real-time risk reporting of borrowers’ off-chain and on-chain positions
  • Security: Institutional grade KYC/AML policies in partnership with Fireblocks, Copper, and Multisignature Wallets (Snowflake, Squads)

“Institutional crypto credit markets require clear price discovery, depth across maturities, and transparent risk management to scale. Friktion Institutional introduces a new asset class to Friktion and a powerful framework for undercollateralized lending to build DeFi’s first yield curve.”

- Uddhav Marwaha, CEO of Friktion Labs

Next for Friktion Institutional

Friktion expansion into the credit markets via undercollateralized lending will help to further unlock full-stack portfolio management within DeFi, complementing Friktion’s current suite of products to enable users to build portfolios that can generate returns across market cycles.

As Friktion builds out DeFi’s first reliable yield curve, therein lies the opportunity for lender positions to be cross-margined into other sustainable yield strategies within Friktion, and over time, more broadly across DeFi. This will essentially create the first Prime offering within DeFi, unlocking further capital efficiency.

About Friktion

Friktion is DeFi’s leading protocol for risk-managed yield strategies. Friktion’s core products, known as Volts, are strategies for Institutions, DAOs, and Individuals looking to generate returns across market cycles. The platform has amassed over 17,000 users and traded >$3 billion in volume, with $30 million in Total Value Locked.

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Friktion brings high quality portfolio management to DeFi.