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Goldfinch: bridging the traditional finance and DeFi world | project is introduced

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Amplify the value of crypto assets, break the circle of traditional lending

Defi's growth has led to the rapid rise of the decentralized lending market, which has grown from $200 million in February 2020 to $8 billion today, a 400% jump in just one year, according to OkLink.

Image credit: Oklink

However, there are big problems with on-chain lending. Since all on-chain actions are permissive and all interactions follow the rules of the protocol, on-chain lending is subject to an "over-collage" mechanism. Typically, loan agreements require a 150% collateral rate, meaning that if a user wants to lend $1 of assets, he or she has to pledge $1.50 worth of assets.

Since the amount of money flowing through the economy directly affects the growth rate of the economy, and the excess mortgage directly limits the money multiplier, it also limits the expansion rate of the DEFI economy to some extent.

Onchain lending that is not backed by the credit system only serves leveraged traders and those who need capital but are unwilling to relinquish their positions, while those who really need capital but do not have capital will not benefit from decentralized lending.

Therefore, if you want to enlarge the volume of crypto finance, let crypto assets break the circle to enter the traditional lending market, and let more people benefit from crypto assets, the excessively high asset mortgage rate is a problem that must be solved. However, it is very difficult to solve this problem simply from the on-chain mechanism. We need to connect the on-chain and off-chain world, and Goldfinch provides a set of solutions.

Since the Goldfinch agreement was launched in December, Goldfinch has lent $1 million worth of assets to users in Mexico, Nigeria, and developing countries in Southeast Asia.

Bridging traditional and on-chain finance by Goldfinch

The Goldfinch agreement will grant lenders a line of credit through which they can borrow stablecoin from the pool of funds under the agreement. Institutions obtain stablecoins, exchange them for fiat and lend them to their users through traditional channels. In this way, the market under the chain can fully enjoy the value of the assets on the chain, and the value of the assets on the chain will be infinitely amplified. All offchain debt issuance, underwriting and related business will be handled by the relevant professional institutions.

The crypto asset holder will act as the provider of funds in the protocol, and the holder will deposit the token in the pool and receive a return. Every time the lending institution returns the interest and principal to the agreement, all the funds will be repaid to the capital provider in real time.

Image credit: Goldfinch Medium

Goldfinch's imagination

In just three months, Goldfinch has partnered with Mexico's Payjoy and Nigeria's QuickCheck to make a $1 million loan.

Image credit: Goldfinch Medium

In the future, Goldfinch aims to be a fully decentralized credit platform, but since it is in the very early stages of the agreement, some steps need to be centralized.

Goldfinch is now more like a credit fund, and the Goldfinch team will act as underwriters to review the qualifications of off-chain lenders. In future, however, all users will be able to become underwriters and lend money in the form of junior bonds, which will pay higher returns than other senior bond investors because of the high risk they take.

On the off-chain side, not only qualified lenders will be able to obtain funds from the agreement, but individuals will also be able to apply for credit directly from the agreement, ultimately building Goldfinch into a fully decentralized credit platform. For example, companies will be able to apply directly for loans to expand their operations, and ordinary users will be able to get money from the agreements just as they would a credit card. All this will be possible in the future.

In a de-banked Web3.0 world, the resistance of various financial intermediaries will be minimized, but this will also make the credit system more important. The credit system is the key to releasing the upper limit of working capital. Without the support of a complete credit system, unsecured lending will still be a false proposition.

The team members

Goldfinch's co-founder, Michael Sall, graduated from the Wharton School and previously served as a product manager at Adobe and head of digital science at Medium. Then, in 2018, Michael Sall joined Coinbase as head of product analytics. Eventually, Goldfinch was founded in mid-2020.

Blake West, who also graduated from Wharton as Goldfinch's co-founder and CTO, went on to work as an engineer at various companies before joining Coinbase in 2018 to run the technology backend.

Investment institutions

Goldfinch's approach to funding has been backed by major institutions and industry leaders, including:Kindred Ventures, & have spentCoinbase Ventures, & have spentIDEO CoLab Ventures,Stratos Technologies, & have spentAlex Pack (Dragonfly), Eric Weingarten (Former Head of Product Compliance at Coinbase), & NBSP;Morgan Beller (jointly created by DIEM), & NBSP;Premal Shah (Kiva), & NBSP;Robert Leshner Compound (Compound), Spencer Noon (Variant Fund), and Tarun Chitra (Founder of Gauntlet)& NBSP;

While the Goldfinch product is not yet fully available to a wide range of users, as an important gateway between traditional finance and the Defi world, Goldfinch will help amplify the value of crypto assets and provide more access to money for people in the off-chain world.