TrueFi

Lending

TrueFi enables users to earn high yields on stablecoin loans and institutions to borrow capital without collateral.

Risk Rating
Watch Out
Protocol Code Quality
Protocol Maturity
Protocol Design
Summary
What we like
TrueFi lenders can earn highly attractive interest rates for supplying liquidity to an institution's borrower pool.
What we like less
Only whitelisted institutions can borrow unsecured loans on the platform and there are limited default protection mechanisms in place. These institutions borrow without depositing any collateral, which leaves minimal protection for lenders in the event of default.
What it means for you
Offers you some of the highest yields on stablecoins across DeFi lending platforms, albeit with the added risk of no collateral backing.
Podcast
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Degen Responsibly
TrueFi: The rise of uncollateralized lending
Our guest today is Ryan Rodenbaugh, who leads BD at TrueFi. Ryan and TrueFi have been scaling the vertical of uncollateralized lending within DeFi, allowing institutional borrowers to tap available on-chain liquidity. In this conversation we explore, how TrueFi works, what makes them unique, how this model differs from Aave/Compound given the use-case. We also dive into how Exponential is assessing the risks of uncollateralized lending.  ----- Degen Responsibly is a series of live talks by Exponential DeFi and a guest protocol. In these conversations we explore some of the latest and greatest projects in DeFi, what makes them unique, their builders but also talk about the risks and what to watch out for. Our goal is to help investors make better informed decisions and help them save time as they do their own research.  ----- Learn more about us at exponential.fi and follow us @exponentialdefi  ----- Information provided here is presented for educational purposes only and does not consider financial advise or any offer or solicitation to buy any of the tokens or invest in any of the pools mentioned throughout the podcast. 
Information
Exploit/Hacks
None
Info
Key Metrics
  • TVL: $38.4K (Rank #221)
  • TVL Ranking by Lending: #0
  • Blockchain: Ethereum
  • Chain TVL
    • Ethereum: $38.36K
Risk Assessment
Watch Out
Protocol Code Quality
  • Code reviewed by several experienced auditors including CertiK, SlowMist and Solidified
  • Public team promotes accountability
  • No documented protocol hacks since launch
Protocol Maturity
  • Core protocol launched in 2022; maturity over one year minimizes technical risk as smart contracts are well battle-tested
  • Top 5% by total value locked reduces risk
  • Multisig wallet controls protocol upgrades
  • Multisig consists of less than 4 signers, which makes the protocol more 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
  • Robust controls to mitigate oracle price manipulation
  • Unsecured lending market with basic investor protection mechanisms to recoup debt repayments in the event of default
Things to know about TrueFi

How TrueFi works

TrueFi is a lending platform that provides uncollateralized loans to institutions. The TrueFi ecosystem has five key users: lenders, borrowers, TRU stakers, the TrustToken team, and portfolio managers. Borrowers are typically institutions that must go through an onboarding process, have at least $10M in unencumbered assets, and have good on-chain credit scores as determined by the team. Lenders provide liquidity to a pool and receive tfTokens in return that represent a receipt of their underlying deposit plus accrued interest. Any unused capital in the pool will be deployed to third-party lending protocols like Aave and Compound. TRU holders can stake their assets to provide first-loss capital to lenders as they are the first ones to be liquidated in case of default. In exchange, TRU stakers earn protocol fees (paid in tfTokens) and TRU rewards. TrueTrading is the team managing the DAO lending pools and is responsible for performing credit analysis on borrowers, as well as pursuing legal action if a borrower defaults. TrueFi also relies on its SAFU (Secure Asset Fund for Users) mechanism to automate the default process. SAFU was initially funded by the TrustToken team and is in charge of dealing with all bad debt accumulated by the protocol. When the SAFU smart contract is triggered, it will reduce the staked TRU tokens by up to 10% of the default amount. If the slashed tokens' value is insufficient to cover the default, the SAFE will use its funds to help repay the affected lending pool for lost funds. Lenders are at risk if the SAFU value is insufficient to cover the remaining default amount.

How TrueFi makes money

Lenders in DAO pools incur no fees for depositing funds. However, lenders must pay an exit fee in order to instantly withdraw liquidity from the pool. This fee is calculated dynamically based on the pool utilization rate (proportion of the pool idle vs. lent out to borrowers). Lenders in portfolios pay a standard protocol fee of 50bps per year to the TrueFi DAO treasury. Moreover, portfolio managers can set optional portfolio fees that can be accrued linearly over time, paid at deposit, or paid at withdrawal.

How you make money on TrueFi

You earn lending fees on TrueFi by depositing your assets to be used by institutional borrowers in either the DAO pools or Capital Markets. TrueFi further enhances its yield by offering its native TRU token as an additional incentive. TRU stakers (stkTRU) can also earn protocol fees and additional TRU rewards, albeit at the risk of losing their staked amount in the event of default in DAO pools.

Additional resources

Replay our Twitter Spaces with TrueFi

Learn more about how we evaluate DeFi lenders