This latest news is further indication of Goldfinch’s value proposition. The service went live on December 2020, pioneering one of the biggest missing pieces of DeFi – loans without collateral.
While DeFi lending protocols have grown massively in the last 2 years, most of these protocols need users to part with some collateral, typically more than the value of the loans they are borrowing (over – collateralized), a situation that limits this lending to a few players.
However, GoldFinch sees things differently.
“But for everyone else in the world, the reason they want to borrow in the first place is they don’t already have the money they need.”
– Goldfinch Finance
Besides uncollateralized lending, Goldfinch is democratizing underwriting by letting different kinds of users contribute to its lending pool.
Goldfinch does not lend directly itself, instead the protocol works by extending credit lines to lending businesses. These businesses use their credit lines to draw down stablecoins from the pool and then they exchange it for fiat and deploy it on the ground in their local markets.
A credit line is a flexible loan from a bank or financial institution. Similar to a credit card that offers you a limited amount of funds – funds that you can use when, if, and how you wish – a line of credit is a defined amount of money that you can access as needed and then repay immediately or over a prespecified period of time.
“In this way the protocol provides the utility of crypto — specifically, its global access to capital — while leaving the actual loan origination and servicing to the businesses best equipped to handle it.” – Goldfinch Finance
On the investor side, crypto holders can deposit into the pool to earn yield with APY currently at 6.56%. As the lending businesses make their interest payments back to the protocol, they’re immediately disbursed to all investors.
With over $115, 487, 183 in total value locked (TVL), this means that the pool is 88.5% utilized to go to different lending initiatives across emerging markets.