What is Goldfinch?
The idea of cryptocurrency loans is not entirely new, but previous offerings have failed to be successful. Today we will look at an ambitious project that addresses previous failings and is already generating a lot of interest.
So, what is Goldfinch?
In plain language, this is a decentralised platform for cryptocurrency loans without collateral. This system allows any participant to become a lender or a borrower, without any dependence on banks or the need for collateral.
How does Goldfinch work?
The protocol has four basic types of participants:
- Liquidity Providers
Provide capital into a fund that can be used by borrowers to access loans.
2. Borrowers
These are participants who are accessing loans.
3. Backers
Are junior (first loss) investors that contribute money into the funds that should be used for lending on the promise of high rewards.
4. Auditors
Ultimately, they are the ones who vote on the approval of borrowers, which is necessary before they can take out loans.
In the picture below you can see how these participants interact with each other.
Why Goldfinch? — according to Goldfinch
- The protocol already claims to serve thousands of borrowers in India, Mexico, Nigeria, and Southeast Asia.
- The protocol claims to have reliable protection against fraudulent schemes and controls the risk of dishonest behaviour.
- Returns of 10–14% are promised from activities uncorrelated with cryptocurrencies, although the protocol is crypto based, and backers can lose everything.
This is a promising project that has great ambitions for the future. It is complex and new, the Goldfinch has big prospects among the other DeFi protocols.
