Lending is a huge market. The crypto industry has opened up new opportunities in it. However, there is one caveat. This is the presence of a deposit. Goldfish Protocol differs significantly from other DeFi projects. This is a decentralized system of lending without collateral. Now you don’t need collateral to take out a loan. A borrower with a small capital can now get access to lending.
Let’s list the main advantages of the Goldfinch Protocol:
- Operating with cryptocurrency. A universal tool through which a borrower can exchange cryptocurrency for local currency anywhere in the world.
- Decentralization and scaling. Now a user from anywhere in the world can access loans as both a borrower and an investor. Goldfinch gives an opportunity to participate in investing to people with very small capital, individuals. On the other hand, borrowers who need a small amount are not interesting for banks — they can now get such loans.
- A system without collateral. You don’t need a credit insurance system. The protocol does this using the concept of “trust through consensus”.
Let’s consider the scheme of the project pools
The Borrower Pool is a place (smart contract) from where borrowers receive funds. It is formed from 2 tranches from Backers and Liquidity Providers.Backers assess the Borrower Pools and decide whether to supply first-loss capital. After Backers supply capital, Borrowers can borrow and repay through the Borrower Pool.
Liquidity Providers supply capital to the Senior Pool in order to earn passive yield. The Senior Pool uses the Leverage Model to automatically allocate capital to the Borrower Pools, based on how many Backers are participating in them. When the Senior Pool allocates capital, a portion of its interest is reallocated to the Backers. This increases the Backersʼ effective yield, which incentives them to both provide the higher-risk first-loss capital and do the work of assessing Borrower Pools Пулы одобряют Аудиторы. Auditors are randomly selected by the protocol, and they provide a human-level check to guard against fraudulent activity.
Let’s touch on each of the groups in more detail:
- Participating Auditors who receive GFI remuneration for providing the protocol with a human eye
- Borrowers-Participants who attract capital from the protocol through Pools of borrowers
- Backers-Participants who provide the junior tranche (first loss) of capital to individual pools of Borrowers.
- Liquidity Providers — Participants who provide capital to the Senior Pool
The protocol is already working successfully on the platforms of emerging markets. Goldfinch Protocol has big-name investors behind its back.
Let’s follow the further development of the project and participate in it.
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