What's Texture

For lenders

Short version: You can precisely select your risk level by choosing which tokens and loan-to-value (LTV) ratios you're comfortable lending against. Alternatively, you can use smart vaults that potentially offer higher utilization rates and better APYs.

A bit longer version: You get access to a wider selection of lending pools with various tokens and risk options (higher/lower LTVs) as collateral, allowing you to fine-tune your risk exposure.

Additionally, instead of manually selecting pools and constantly monitoring supply rates, you can deposit into a vault managed by a curator who handles allocation and rebalancing.

For borrowers

Short version: You can use more assets as collateral.

Longer explanation: Having all assets in a few pools is convenient—you get one USDC (and other stablecoin) liquidity pool that can be lent against various collateral types, serving borrowers with different tokens.

However, this approach has limitations: you can't add too many risky collateral tokens without increasing bad debt risks (and many lenders prefer to avoid excessive risk).

So what's the solution?

One approach is creating separate pools for each long-tail asset (like memecoins), where each pool accepts that specific asset and lends out stablecoins.

At first glance, this seems ideal: lenders can choose specific memetokens to lend against for higher yields, while borrowers can leverage these tokens for potential gains.

But there's a catch: this model becomes inefficient with dozens of pools. Borrowing demand varies across tokens, and for markets to work well, lenders would need to constantly rebalance between pools—an impractical amount of work.

Without active management, the lending protocol risks becoming a graveyard of inactive pools (common in DeFi) with under $100k TVL and insufficient stablecoin liquidity for borrowing.

That's where Vaults shine.