Blockchain technology in general, and DeFi in particular, have completely revolutionized the world of finance. Thanks to the power of blockchain, hundreds of millions of people around the world have gained access to a fair, democratic, and inclusive financial ecosystem that allows them to easily improve their personal finances.
DeFi lending protocols are some of the most groundbreaking applications of blockchain technology. They make traditional creditors like banks obsolete, as they empower individuals and businesses to access effective financing sources with minimum effort.
Goldfinch is a revolutionary decentralized protocol that is making the next step in the evolution of DeFi Lending — but what is Goldfinch exactly, and how is it different from other DeFi platforms?
An Introduction to Goldfinch
Goldfinch is an advanced DeFi lending protocol providing crypto loans without collateral.
While crypto loans platforms are already popular, they all have the same problem: they require over-collateralization with digital assets, which means that they are only accessible to a small group of borrowers able to afford them.
Goldfinch is different. By utilizing the “Trust Through Consensus” mechanism, the Goldfinch protocol enables borrowers to prove their creditworthiness through the collective assessment of other participants within the decentralized network.
In other words, with Goldfinch you don’t need crypto collateral to take a loan. The collective assessment is all that’s needed to signal for automatically allocating funds to you. It’s not only much easier — it’s also much more affordable and accessible to anyone, allowing the DeFi ecosystem to expand and grow in an organic way.
But Goldfinch is not just attractive to borrowers — all parties involved in the Goldfinch economy are empowered with unique opportunities unavailable on other DeFi lending protocols.
Thanks to Goldfinch, capital providers can enjoy increased exposure to new markets and profit-making contingencies. By allowing creditors access to a wider public of borrowers, Goldfinch enables them to make more money and generate greater passive yield through lending their assets. High-quality lenders on the Goldfinch network can expect to earn stable 10–14% APY (Annual Percentage Yield).
But how exactly does Goldfinch work?
Goldfinch: the Most Profitable DeFi Lending Protocol
Like all DeFi crypto loans platforms, Goldfinch is built as a peer-to-peer, decentralized network connecting lenders to borrowers. However, Goldfinch massively enhances this basic concept by enabling two different types of lenders within the network: backers and Senior Pool liquidity providers.
Backers
Backers supply junior tranche (first-loss) capital to individual Borrower Pools — the pools which are directly used by the borrowers to take crypto loans. The current yields for borrower pools are >10%.
The main mission of backers is to evaluate borrowers and verify their creditworthiness. Backers can also achieve higher returns if the Senior Pool leverages them with additional senior tranche capital, provided by Senior Pool liquidity providers.
Senior Pool Liquidity Providers
Senior Pool Liquidity Providers add liquidity to the Senior Pool, which is a specialized tool designed to provide additional senior tranche capital to the Borrower Pool, according to the Leverage Model.
Senior Pool Liquidity Providers can enjoy lower risk compared to the junior tranche backers. To account for the lower risk of the senior tranche, 20% of the senior tranche’s nominal interest is reallocated to the junior tranche. In addition, the protocol retains 10% of all interest payments as reserves, which are managed through decentralized governance.
As a result, the Senior Pool earns an effective interest rate equal to 70% of the nominal interest rate of the junior tranche. This currently transfers to a passive yield of 6.16%
Making Crypto Loans Accessible to Anyone
Cryptocurrency loans are an amazing opportunity for individuals and businesses to easily gain new sources of financing. However, all the most popular DeFi lending protocols in the modern-day blockchain ecosystem have the same problem — extremely high collateralization requirements.
Because of that, while DeFi lending was a great concept, in theory, it wasn’t really applicable in practice for most people. Fortunately, this situation has now changed thanks to Goldfinch.
The unique Trust Through Consensus mechanism of Goldfinch is built on two different lender roles: backers and senior liquidity providers. This exact protocol architecture is what elevates Goldfinch over all other DeFi lending protocols on the market.
If you ever wanted to take a crypto loan but you weren’t able to afford huge collateral requirements, Goldfinch is here to finally answer your needs: for the first time in history, Goldfinch empowers you to loan digital assets with no collateral!
