Goldfinch

Lending

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.

Risk Rating
Watch Out
Protocol Code Quality
Protocol Maturity
Protocol Design
Summary
What we like
Goldfinch lenders can earn highly attractive interest rates for supplying liquidity to an institution's borrower pool.
What we like less
Loans are collateralized off-chain but only users with a minimum of $10K invested in the Senior Pool can perform due diligence into the borrower's covenants and loan details. The Senior pool is often fully utilized, so lenders can only cash out by selling their deposit tokens for a discount in the secondary market (Curve).
What it means for you
Offers you some of the highest yields on stablecoins across DeFi lending platforms through loans collateralized off-chain with real-world assets.
Information
Exploit/Hacks
None
Info
Key Metrics
  • TVL: $3.5M (Rank #175)
  • TVL Ranking by Lending: #0
  • Blockchain: Ethereum
  • Chain TVL
    • Ethereum: $3.51M
Risk Assessment
Watch Out
Protocol Code Quality
  • Code reviewed by several experienced auditors including Trail of Bits and CertiK
  • Public team promotes accountability
  • No documented protocol hacks since launch
Protocol Maturity
  • Core protocol launched in 2021; maturity over one year minimizes technical risk as smart contracts are well battle-tested
  • Top 10% by total value locked reduces risk
  • Multisig wallet controls protocol upgrades
  • Multisig consists of at least 4 signers, which means the protocol is less susceptible to centralization risks
  • No timelock exists or no information documented, which mean a malicious actor could approve upgrades without any delay
  • Low voting power concentration reduces risk
Protocol Design
  • Protocol could be susceptible to negative feedback loops
  • Unsecured lending market with robust investor protection mechanisms to recoup debt repayments in the event of default
  • Goldfinch requires borrowers to enter legal agreements, which provides recourse in the event of default as loans are collateralized off-chain with real-world assets
Things to know about Goldfinch

How Goldfinch works

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.

How Goldfinch makes money

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.

How you make money on Goldfinch

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.

Goldfinch Pools
Goldfinch USD Lending
8.5%
Yield
$57M
TVL
Risk
C
Protocol
Goldfinch
Chain
Ethereum