Goldfinch is a project that expands opportunities in cryptocurrency lending! Now no collateral is required for a loan.
Now the protocols that work in the field of loans issue loans against collateral, as a rule, one of the main cryptocurrencies — Ethereum or Bitcoin. To get a loan, the borrower blocks his ETH or BTC in a smart contract and receives in return the tokens of the lending company.
The size of the collateral is quite high, which limits the possibilities of obtaining a loan for everyone.
The Goldfinch project evaluates creditworthiness based on the collective assessment of the project participants, and not on the basis of their cryptoassets.
What does collective assessment mean?
The Goldfinch protocol has 4 main participants:
- Borrowers
- Backers
- Liquidity Providers
- Auditors
Borrowers are participants who need a loan. They create a pool of borrowers, where they leave applications indicating the conditions under which they need a loan, for example, the interest rate and the repayment period.
Further, the Borrower’s application goes to the auditor. The auditor checks the borrower. They do not assess the creditworthiness of the borrower, but check the legality of the data specified in the application. Is this Borrower really doing as indicated and is there collusion with other participants. Verification is carried out by voting. You can become an auditor by blocking your GFI tokens and passing verification.
After passing the stage of verification by auditors, the Borrower gets to the Sponsor (backer). The sponsor evaluates the borrower and provides capital at risk. For verification, he may additionally request information from the Borrower, arrange a meeting, and ask additional questions. The loan is issued in two tranches, one tranche from the Sponsor — the Junior Pool, the second tranche from the Liquidity Provider — the Senior Pool.
The liquidity provider supplies its capital to the Senior Pool. Liquidity providers are interested in passive income. The senior pool provides additional capital from the senior tranche to the pool of borrowers in accordance with the leverage model. This is the main difference between a Liquidity Provider and a Sponsor. Since the Liquidity Provider bears lower risks than the Sponsor, 20% of the nominal share of the Senior tranche is allocated as a fee to the Junior tranche for higher risks and additional work to verify the Borrower.
