What is Goldfinch? Goldfinch expands access to capital in emerging markets where crypto can truly empower financial inclusion.
How it works
The protocol works by providing lines of credit to credit companies. These companies use their lines of credit to receive stable coins from the pool and then exchange them for fiat and set them on their local markets. In this way the protocol provides the usefulness of the cryptocurrency — in particular its global access to capital — while leaving the actual providing and servicing of loans to the enterprise that is best available to do in this way.
Our mission is simple. We create a decentralized credit platform that increases access to financial services. We suppose that there is an enormous untouched crediting potential in the world. Nowadays it is expensive to be a bank and this fact reduces the range of available lenders. We create a platform that provides an opportunity for anyone to become a lender.
We have three main stages of our development:
1. Build a “cryptocurrency loan fund” that makes autonomous income sources available and consolidated in DeFi.
2. Decentralize the network so that everyone can suggest or estimate loans, not just the Goldfinch team.
3. Support for smaller and smaller lenders so that everyone can be a lender through the protocol, even individual person
This structure of the Goldfinch project isn’t much difficult but it has a great future.
Why loans without collateral matter
Total borrowing on cryptocurrency networks surpassed $ 4 billion last month, up from less than $ 200 million a year ago. But even this growth dramatically underestimates the true potential of DeFi. This is because all of this lending is overcollateralized. For every $ 1 someone borrows from these networks today, they must first invest ~ $ 1.50 in another asset they already own.
Let’s go over the advantages of the project and the reasons why Goldfinch will be the new gold in the world of DeFi
- Real-world impact
Goldfinch expands access to capital in emerging markets where crypto can truly empower financial inclusion.
- 10K+ borrowers and growing
The protocol is already serving thousands of borrowers across India, Mexico, Nigeria, and Southeast Asia.
- Stable 10%+ yield
High-quality borrowers provide expected 10–14% APY from real-world activity uncorrelated with crypto.
Liquidity Providers supply the capital to the Senior Pool. The protocol automatically allocates the Senior Pool to the senior tranches of Borrower Pools.
Borrowers offer pools (with terms such as interest rate) for the Backers evaluation
Backers supply capital to the junior tranches of Borrower Pools.
Governance is managed by a community DAO and has the ability to perform maintenance functions and parameter adjustments via decentralized governance votes, including: ● Upgrading contracts ● Changing protocol configurations and parameters ● Selecting Unique Entity Check providers ● Setting the rewards and distribution of GFI ● Pausing protocol activity in the event of an emergency.
The Leverage Model determines how much capital the Senior Pool allocates toward each Borrower Pool, based on how much it “trusts” each Borrower Pool. Trust Through Consensus In order to determine how to allocate capital from the Senior Pool, the protocol uses a principle of “trust through consensus.” This means that while the protocol doesn’t trust any individual Backer or Auditor, it does trust the collective actions of many of them. At a high level: when more Backers supply to a given Borrower Pool, the Senior Pool increases the ratio with which it adds leverage. Because this approach relies on counting individual Backers, the protocol must ensure they are in fact represented by different people. Therefore, all Backers, Borrowers, and Auditors require a “unique entity check” to participate (see the Unique Entity Check section).
Phase 1: Credit Fund on Crypto
The current version of the Goldfinch protocol operates like a credit fund, except on crypto. To start, we’re serving as the first underwriter evaluating lending businesses and setting the terms. This takes the critical step of making this real-world source of yield available on chain and composable with the rest of DeFi.
Phase 2: Decentralized Underwriter Network
The protocol will enable anyone to underwrite. Underwriters will be able to assess businesses and stake junior debt capital on them. In return for doing this work, they’ll receive higher yields via commissions from passive senior debt investors. This will allow the protocol to scale the underwriting process and onboard new lending businesses entirely through the community.
Phase 3: Long Tail of Lenders
The protocol will support smaller and smaller lenders who don’t already have loan servicing infrastructure to the point where anyone can make loans, even individuals. The protocol will do this by bringing end-user loans on chain, providing self-serve lender tools, and building upon a vibrant underwriter marketplace.