What is Goldfinch?
In the past month, the total amount borrowed across crypto networks passed $4B, up from less than $200M a year ago. For every $1.00 someone borrows on these networks today, they must first put up ~$1.50 of another asset they already own. It leads lending to be overcollateralized. Here the Goldfinch comes.
Goldfinch is a decentralized protocol that allows for crypto borrowing without crypto collateral. By incorporating the principle of “trust through consensus”, the Goldfinch protocol creates a way for borrowers to show creditworthiness based on the collective assessment of other participants rather than based on their crypto assets.
How does it work you may ask?
There are four core participants : Borrowers, Backers, Liquidity Providers, and Auditors
Borrowers are participants who seek financing, and they propose Borrower Pools for the Backers to assess.
Backers assess the Borrower Pools and decide whether to supply first-loss capital. After Backers supply capital, Borrowers can borrow and repay through the Borrower Pool.
Liquidity Providers supply capital to the Senior Pool in order to earn passive yield. The Senior Pool uses the Leverage Model to automatically allocate capital to the Borrower Pools, based on how many Backers are participating in them.
Auditors vote to approve Borrowers, which is required before they can borrow. Auditors are randomly selected by the protocol, and they provide a human-level check to guard against fraudulent activity.
Goldfinch protocol has already partnered with such highly reputable lending businesses as Payjoy , Quickcheck, Alma.
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