Goldfinch is a decentralized credit protocol, with a mission to bring the world’s credit activity on-chain while expanding access to capital. The protocol makes crypto loans without requiring crypto collateral.
Goldfinch is a decentralized lending protocol that enables uncollateralized loans. The platform has three key roles: investors (lenders), borrowers, and auditors. Investors are users who provide USDC to the protocol to be utilized by borrowers and can further be segmented between backers and liquidity providers (LPs). Backers assess individual Borrower Pools and lend directly to them as first-loss capital to earn the highest yields. LPs provide second-loss capital to the Senior Pool, which automatically diversifies the deposited funds across all Borrower Pools based on the assessment of backers. Borrowers are generally institutions that are looking for financing through Goldfinch and want to add a Borrower Pool to the platform. Borrower Pools consist of a junior and senior tranche. Backers lend funds to the junior tranche, while LPs lend funds to the senior tranche. These pools are smart contracts that contain the loan terms including the interest rate and repayment schedule. When a borrower makes a repayment to one of their Borrower Pools, the payment is first applied to any interest and principal owed to the senior tranche, followed by any interest and principal owed to the junior tranche. As such, backers take on the most risk by providing first-loss capital; this serves to incentivize backers to properly asses the viability of the pools. LPs who lend to the Senior Pool thus take on less risk with the added security that they will get paid first in the case a Borrower Pool goes into default. Auditors are users that vote to approve borrowers, which is required before proposing a new Borrower Pool to backers. The auditors are randomly selected to provide an assessment of the borrowers for any fraudulent activity and earn rewards in return. Goldfinch determines how the Senior Pool funds are allocated through a novel concept called "trust through consensus", which relies on trusting the collective actions of backers and auditors. This is achieved by ensuring all backers, borrowers, and auditors have a unique identity (UID). UID is a non-transferrable NFT representing KYC and/or US investor accreditation verification on-chain.
Goldfinch retains 10% of all interest earned in a Borrower Pool as a protocol reserve, which is managed through decentralized governance. There is also a 0.5% withdrawal fee from the Senior Pool that gets allocated to the protocol reserve.
You earn lending fees on Goldfinch by depositing your assets to be used by institutional borrowers in either the Senior Pool (as a LP) or individual Borrower Pools (as a backer). Goldfinch further enhances its yield by offering its native GFI token as an additional incentive.