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