# Why RAMMLend

There are two incumbent lending pool models, both of which offer less valuable product experiences for both parties. The problem stems from the supply side, which trickles up to the demand side

### **Model 1**&#x20;

Liquidity suppliers price risks & supply to lending markets that they think are fairly priced.&#x20;

**Problem**: Most LPs aren't sophisticated to do so. And when less is known, (generally)less is supplied. The next billion users in DeFi aren't going to choose which lending pools they want to lend to.&#x20;

### **Model 2**&#x20;

Protocol developers do their diligence and accept collaterals they deem fair.&#x20;

**Problem**: Devs can't possibly underwrite all kinds of assets, which fails to generate liquidity on many. This model can't scale in the long term with more assets on-chain. It also fails to align incentives with LPs and assessors, as there is no binding enforcement for the devs to underwrite well on behalf of the LPs.&#x20;

We can see both models can't scale in the advent of a vibrant digital asset economy. They result in less capital being supplied, which in aggregate increases inefficiency and the cost of capital for the demand side.

Our core thesis is that a permissionless mechanism that delegates the underwriting system to the community solves these scalability problems and creates grounds for capital supply to efficiently meet demand. It allows decentralized entities to underwrite all kinds of assets in an incentive-compatible manner and allows LPs to earn passive yield.&#x20;

{% hint style="info" %}
There are a lot more passive liquidity sources than there are active liquidity&#x20;
{% endhint %}

Imagine what on-chain digital assets can take form of in the future. Assets such as financial positions, real estate, identities, credit, labor, metaverse/game items, etc. And to create liquidity for all these different kinds of assets, at a fair price, is going to unlock a lot of value.

Not only does RAMMLend democratize banking and make more things incentive-proof, it creates a whole new job sector( like youtube did for creators) when at scale;

people with some seed capital and finance knowledge can start their own 'underwriting\&lending business' by becoming managers, much akin to starting their own local businesses like restaurants. Long-term profitability ofc will go up the more correct they are.
