Divine Research Launches 30,000 Unbacked USDC Loans via World ID, 40% Default Rate at 20-30% Interest for Underserved Borrowers

Divine Research, a San Francisco-based fintech firm, has issued 30,000 unbacked USDC loans since December 2024, utilizing Sam Altman’s World ID verification system to serve borrowers excluded from traditional banking. The platform targets underserved overseas users with microfinance-style lending, offering loans under $1,000 at 20-30% interest rates. World ID’s iris-scanning technology prevents identity fraud by ensuring borrowers cannot open multiple accounts after defaulting, addressing a persistent challenge in decentralized finance. Despite a reported 40% default rate on first-time loans, founder Diego Estevez argues that high interest rates and partial recovery of free World tokens compensate lenders, enabling the platform to sustain operations. Estevez describes the model as “microfinance on steroids,” emphasizing its focus on everyday users like teachers and small business owners who lack access to conventional credit [1].

The initiative aligns with broader trends in crypto lending, where startups are increasingly leveraging AI and decentralized coordination to manage risk. Competitors such as 3Jane and Wildcat are experimenting with uncollateralized loans and automated lending protocols, signaling growing sophistication in the sector. JPMorgan Chase, meanwhile, is reportedly exploring Bitcoin-backed loans, reflecting renewed institutional interest in crypto assets following the 2022 collapse of Celsius and Genesis. The latter’s failure, which saw a $2 billion lawsuit and regulatory scrutiny, has underscored the need for robust verification systems and transparent protocols in lending [2].

Divine Research’s approach highlights the tension between innovation and risk in decentralized finance. By using high interest rates to offset defaults, the platform attracts everyday investors seeking returns in a volatile market. Lenders profit from structured risk management, where liquidity providers are designed to consistently earn after accounting for losses. However, critics note that such models remain vulnerable to systemic shocks, as seen in the collapse of previous crypto lenders. Estevez’s model mitigates some risks through World ID’s biometric verification but introduces new dependencies on third-party technologies like OpenAI’s infrastructure [3].

The broader crypto lending landscape is evolving rapidly. Startups like 3Jane are deploying AI agents to automate underwriting while reducing rates for borrowers with verifiable income, while Wildcat focuses on tailored loan terms for trading firms. These innovations aim to balance accessibility with security, addressing gaps left by traditional finance. Institutional players, including JPMorgan, are cautiously re-entering the market, suggesting a shift toward regulated frameworks as the sector matures.

Divine Research’s initiative underscores the potential of decentralized tools to expand financial inclusion but also highlights the sector’s fragility. The use of iris-scanning verification represents a significant step in mitigating fraud, yet it relies on the reliability and scalability of World ID. As crypto lending attracts both retail and institutional participants, the balance between innovation and regulatory oversight will determine the sector’s trajectory.

Source:

[1] [title1] https://en.coinotag.com/divine-research-uses-usdc-for-unbacked-loans-verified-by-world-id-targeting-underserved-borrowers/

[2] [title1] https://en.coinotag.com/divine-research-uses-usdc-for-unbacked-loans-verified-by-world-id-targeting-underserved-borrowers/

[3] [title1] https://en.coinotag.com/divine-research-uses-usdc-for-unbacked-loans-verified-by-world-id-targeting-underserved-borrowers/