Goldfinch — a top project with revolutionary ideas
Hello friends!
Hope you have some free time. And if not, then let it appear! Today we will talk about a very interesting project. Its name is Goldfinch.
So what is this project and what is its uniqueness?
INTRODUCTION. What is Goldfinch?
Goldfinch is a project that provides unsecured loans. In fact, this is a solution to one of the most unsolved problems of Defi. Since its launch in December, the protocol has already raised $ 1 million in capital for thousands of borrowers in Mexico, Nigeria and Southeast Asia.
First step or what are unsecured loans?
Now used olee detail what is a loan without collateral, and why it is so important
Today, for example, in order to borrow $ 10,000 in the United States, you need to provide a loan security of at least $ 15,000 to the bank. You can show an apartment, a car, or whatever! But only what suits your bank, and again I remind you of at least 15,000. But what to do for those people who have everything ready, ideas, business plan. But they do not have 15,000 for example, but they have a great desire and confidence in their project.
And this is where the Goldfinch project comes in. It will allow you to take the necessary loan or loan absolutely without collateral !!
You can think and count as you like, but in my opinion this is a breakthrough !!
Second step or creation of a decentralized network
So what does it take to realize the idea of a loan without collateral. Goldfinch has gone in the direction of creating a decentralized network that will allow everyone to participate in it. Not only as a lender, but also as a person who gives a loan. Mmmmm. I always wanted to feel like a banker)))
I think everyone understands the advantages of this. No overhead costs (like banks), no need for customer underrating. All this greatly simplifies the work.
Step # 3. Protocol operation
The protocol works by providing lines of credit to credit companies. These companies use their lines of credit to obtain stablecoins from the pool and then exchange them for fiat and list them in their local markets. Thus, the protocol provides the usefulness of the cryptocurrency — in particular, its global access to capital — while leaving the actual provision and servicing of loans to the businesses best equipped to do so.
Below is an example from the official medium of the project, in which everything is schematically indicated.
Step # 4. Difference from other Defi protocols
As you probably already understood, the difference is huge. After all, in none of the existing DeFi protocols you can get a cent without security. The whole essence of the rest of the protocols is built on this. But not Godfinch! I believe this is a breakthrough in blockchain lending!
Step # 5. We understand the project.
So we realized that we have a top-level project before us. Let’s get to know him together and study in detail.
Let’s start with the terminology.
Auditors are members who receive a GFI award for protecting a protocol with the human eye.
Supporting — participants who provide capital of the junior tranche (first loss) to individual pools of borrowers.
Borrowers are participants who raise capital from the protocol through pools of borrowers.
Borrower Pool — a smart contract that encodes a set of financing conditions for the Borrower, including the interest rate and repayment schedule, and through which the Borrower can borrow capital and repay it on these terms.
GFI is a token used for management votes, auditor rates, auditor vote rewards, sponsor rates, early sponsor rewards, and other potential rewards for all protocol participants.
Governance — A smart contract that is managed by the DAO community and has the ability to update the protocol through decentralized governance voting.
Leverage Model — A formula by which the senior pool automatically determines how much capital to allocate to each pool of borrowers.
Liquidity providers are participants who provide capital to the main pool.
Senior pool is a smart contract that accepts capital from liquidity providers and automatically distributes capital to the senior tranche of borrower pools in accordance with a leverage model.
After we have dealt with the terminology, we will continue further.
Step 6. Key differences between Senior POOL LP and BACKERS roles.
In order to understand, let’s figure out who are the SPONSORS? Sponsors evaluate borrowers and contribute capital of the first loss to their pools of borrowers.
It seems to be understandable. But … not to the end. The point is that BACKERS view pools from an investment point of view. They carefully study the information, audit borrowers and decide to provide some amount to the junior tranche of the pool or not.
And here is how the interest rate is distributed:
20% goes to the junior tranche in order to take into account the lower risk of the senior tranche;
10% — a reserve managed by decentralized management;
70% is the senior pool’s effective interest rate.
For example, consider a pool of borrowers with an interest rate of 20% and a leverage ratio of 4.0X. If sponsors provide $ 100,000, the senior pool will provide an additional $ 400,000. Assuming that the Borrower borrows $ 500,000 for one year, he will pay $ 500,000 * 15% = $ 75,000 in interest. From this amount, the senior pool receives 0.2 * (1–0.1–0.2) = 14% per annum, or 400 thousand * 0.14 = 64 thousand dollars. Supporters receive 0.2 * (1–0.1 + 4 * 0.2) = 34% per annum. The rest is 10% of the protocol reserve.
Hopefully it’s a little clearer now. Moving on.
In order to stimulate the development of sponsorship in the early stages, the project provided for a special reward system. The percentage of the consideration to be claimed is proportional to the percentage of the total expected repayment of the principal plus the interest that the Borrower successfully pays.
The role of sponsors seems to have been sorted out. Now let’s move on to Senior POOL Liquidity Providers.
Liquidity providers supply capital to the senior pool to generate passive returns. The Senior Pool automatically distributes its capital among the senior tranches of the Borrower Pools.
Liquidity providers supply capital to the senior pool to generate passive returns. The senior pool then automatically distributes this capital to the senior tranches of the borrower pools according to the leverage model. Thus, the main pool provides both diversification of borrower pools and seniority in relation to the capital of the sponsors’ first losses. Capital contributions to the senior pool are also completely without authorization. To compensate sponsors for both the assessment of the borrower pools and the provision of capital for the first loss, 20% of the nominal stake in the senior pool is reallocated to the sponsors.
So, the main interest of investors to throw funds into the Senior pool is to receive passive income.
Fuh, it seems to be sorted out))
Believe me, you can write about a project indefinitely. Subscribe to my medium, I will try to write about this project as often as possible.
And of course, if you have any questions — write in the comments, I will definitely try to answer them!
Good luck friends!
Links to the project itself: