DeFi Lender Goldfinch Hits $100M in Loans as Real-World Crypto Model Gains Momentum


Crypto is a circular system where whales borrow money from their assets to inflate ponzi schemes and throw those tokens at retail traders betting that those coins are the future of finance.

It’s a way of thinking about crypto.

Another? Crypto provides loans to people doing business in non-crypto economic sectors. Blake West pushes this angle.

Real world

West is the co-founder of Goldfinch, a platform that “brings crypto lending to the real world.” On April 26, Goldfinch’s loan book reached $100 million. Last February, Protocol had $1 million in loans. This step shows that there is an urgent need for unsecured capital, especially in developing countries, says West.

Active loans since Goldfinch’s inception. Source: Dune Analysis

“Goldfinch offers these real loans that are tied to real-world activity [and] still has very good returns,” West told The Defiant.

He noted that yields on the Compound Finance protocol are around 2% while Goldfinch’s senior tranche is above 8%. The protocol offers the senior tranche to passive investors and a higher yielding junior tranche to “lenders” who actually propose and negotiate with borrowers on a per-investment basis.

Client portfolios

Unsecured lending, especially to small borrowers, is a high risk business. It’s not just the flaws that rigs need to worry about. Regulators can also step in with new rules to protect borrowers, which can increase the cost of capital and day-to-day business operations. Add to that the volatility of crypto and it would seem that the risks could be even greater.

West says Goldfinch’s lending isn’t tied to demand within crypto, so rates deviate from those arising from demand to produce a farm, for example. Instead, the protocol grants loans to companies like Greenway which distributes highly efficient and safe stoves in India. The platform provides loans in 18 countries, including Brazil and Kenya.

The model has attracted heavy hitters: In January, Andreessen Horowitz led a $25 million investment round in the startup; hedge fund manager Bill Ackman also participated. A16z general partner Arianna Simpson said Goldfinch was able to offer DeFi loans to borrowers in emerging economies who lack collateral to obtain conventional loans.

“Goldfinch is a decentralized lending platform that expands the pool of potential lenders beyond just banks,” Simpson posted.

To that end, Goldfinch counts financial technology companies among its borrowers, which facilitate lending in their respective fiat currencies. West says the next step for these fintech companies is to lend directly to their clients’ wallets.

Goldfinch has rivals. West said projects like Centrifuge, Maple financingand TrueFi are making moves into the unsecured lending space. He argues that “unsecured,” meaning the loan is unsecured, is a misnomer because the debt is backed by off-chain assets.

For example, when a smartphone finance company borrows money from Goldfinch, it gives people smartphones on payment plans. If people fail, the phone company cuts their service. Customers probably don’t want to owe money on a useless phone, so they’ll be motivated to repay the loan to the company, which in turn repays Goldfinch.

credit protocol

“Basically all of the loans that we make are secured and in fact are secured,” West said.

In light of such dynamics, West prefers to call Goldfinch a “credit protocol” instead of an “unsecured loan protocol.”

Yet, despite all the growth in lending volume, the native Goldfinch token is cratering. GFI has lost nearly half its value since going online January 11according to CoinGecko. Of course, the DeFi market slumped, with the market capitalization of the top 100 names in the industry down 16% over that time.

GFI performance over 90 days. Source: CoinGecko

While lending is fraught with regulatory and payment risk, Goldfinch’s $100 million milestone suggests that credit protocols with real utility are emerging as a new growth area in crypto.

“Margin trading and all that only goes so far, but once you start tapping into real economic activity, that’s when DeFi can hit trillions of dollars instead of tens of billions. “West said. “I don’t think people in the crypto markets quite understand that this is where the growth of DeFi will come from.”


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