TrueFi, Maple Finance, and Goldfinch are the biggest and primarily have permissionless lenders and kyc'd borrowers. Some of those borrowers may make consumer loans (Goldfinch is like this).
Permissionless uncollateralized borrowing has yet to take off (even though contracts for this already exist and are live), but I suspect it will once decentralized stablecoin on chain supply gets decoupled from current centralized stablecoin supply (decentralized credit based stablecoins built on top of incentivized permissions management of on <-> off chain flows [via over collaterlized decentralized stablecoins and centralized stablecoins alike] and on/off chain risk [via derivatives]). Decentralized derivatives protocols will be key to permissionless uncollateralized lending growth imo, but we are not there yet (I think we need to continue to see global markets break down more in OTC/CCP IRD's and tradfi counterparties continue to lose trust with one another in derivative transactions for this to grow faster in DeFi).
I can see that in the next 10-20 years, 20% of the eurodollar system with be contained within (multichain) permissionless DeFi protocols as HNW individuals and tradfi institutions outside of the US abandon CCPs and typical OTC derivatives txs.
I won't have to argue with folks at ihsmarkit like I do now for making EOD CDX data public (like it was before they were acquired by shit & pee global), when I can pull it from on chain contracts in real time.
I understand it very well, that's pretty much the risk to be mitigated (or not) by who the loans are extended to on the protocol level (when not trying to do it in the KYC/ofchain legal agreement way which is how its done now for the most part). Pools of capital can be lent to specific actors in a non permissioned way that can be governed by the the protocols users or on/off by the on chain contracts themselves automatically when certain on chain conditions are met.
Also, for the non corporate uncollateralized lending in defi now through flash loans (i.e. via Aave), it is impossible for the borrower to walk away from borrowing the funds because the loan must be paid back in the same transaction or entire transaction reverts. However this isn't appropriate for typical consumer loans.
Currently, a lot of the centralized companies with their protocols on chain mitigate the risk just by restricting the pool of borrowers to those who they can legally go after to recoup any losses in the event of a default (just like in tradfi, but still the risks remain).
In the case of a derivatives protocol, writers can borrow against buyers deposits (instead of having to put up their own stablecoin deposits to back the writing) to open positions with the expectation that the writers can write enough volume to net out the delta most of the time while capturing a spread. If/when they (the writers in the derivative liquidity pools) can't and if enough addresses choose to withdraw the decentralized overcollateralized/centralized stablecoins from the protocol (rather than transferring/swapping their protocol credit to another address who wants to buy or write derivatives, or use as a unit of accounting outside of the protocol) and there is a shortfall, decentralized overcollateralized/centralized stablecoin yielding debt tokens can be issued by the protocol automatically (as well as raising decentralized overcollateralized/centralized stablecoin collateral requirements across the board for writers who haven't been cleared by protocols risk management contracts or by some kind of on chain governance) to those trying to withdraw who can sell it on a dex at a premium or discount to par value of the stablecoin yielding debt token.
The risk doesn't go away in tradfi with all the uncollateralized lending now, it gets spread throughout all the actors of the system in various ways, much of which isn't very transparent to all actors in the system (and even for those in the know, it is not in real time). The same (spreading risk through various actors that engage with the protocol) can be done in a DeFi context minus the opacity we have now (we all can see what addresses have/done what, regardless of whom/what is behind the address).
There isn't going to be a one size fits all approach to uncollateralized lending in DeFi. Protocols will do it differently based on what the users see fit to do with their funds and will manage the risks in many different ways (some of which will be better than others).
They do exist, Aave allows for this, there is no one to approve the flash loan. Just that you can only borrow the funds for specific context that I described and the borrower will have to pay off the loan or the loan wont be made and will fail. You can't do this at all in tradfi.
> They're conventional loan agreements that are enforced by courts of justice.
And even if these happen traditionally, no defi involved, the borrower many not be able to pay of the loan. Risk will be eaten by someone. Courts of justice can't squeeze blood from stone. But Aave doesn't face this risk. Maybe other protocols will, but thats the risk people have to accept when they engage with the different protocols.