Introduction to Goldfinch: The New Era of Cryptocurrency Loans

Goldfinch is a decentralized protocol that provides infrastructure for cryptocurrency borrowing without collateral. There have been plenty of crypto lending platforms that require collateral to get a loan, making it hard to impossible for small companies to get these loans. Goldfinch is trying to resolve this problem by providing uncollateralized loans to fintech companies via the “trust of consensus” principle.

There are four main participants in the ecosystem: Borrowers, Backers, Liquidity Providers, and Auditors. The critical feature of the Goldfinch protocol is that Borrowers are assessed based on their participants and not crypto assets. This feature dramatically expands the potential borrowers and capital providers who can gain exposure. The process of interaction within the protocol is very straightforward yet effective.

How does it work?

Borrowers are fintech companies who are looking for crypto loans and create Borrower Pools to apply for some. Backers are participants who assess Borrower Pools and “vote” for them by supplying first-loss capital to the Pool if they find it creditworthy enough. Liquidity providers maintain Senior Pools, and they trust the consensus mechanism within the protocol that automatically allocates funds from Senior Pool towards Borrower Pools that are determined to be creditworthy. And last but not least, Auditors are required to monitor the participants and human-check Borrowers to either approve them or not.

Looking at the chart, you will find a more precise representation of how the participants interact within the protocol. If you want to get more details on how the protocol operates, you can check the Goldfinch whitepaper or visit their website. Overall, it looks like an excellent solution for crypto loans, and I firmly believe it is just the beginning for Goldfinch.