what’s the goldfinch

There are big problems with current on-chain lending. Since all on-chain behaviors are permissionless, all interactions follow the rules of the agreement, which also makes on-chain lending limited to the “over-collateralization” mechanism. Generally, the loan agreement requires the user to have a mortgage rate of 150%, which means that if the user wants to lend 1 USD of assets, they need to mortgage 1.5 USD of assets.

Since the amount of liquidity in the economy will directly affect the growth rate of the economy, over-collateralization directly limits the currency multiplier, which also limits the expansion rate of the DeFi economy to some extent.

On-chain lending without the blessing of the credit system can only serve leveraged traders and currency holders who need funds but are unwilling to give up positions. Those who really need funds but do not have capital cannot borrow from decentralized lending. Benefit.

Goldfinch bridging tradition with on-chain finance

The Goldfinch agreement will grant lending institutions a credit line, and the lending institution can borrow stablecoins from the agreement’s fund pool through the credit line. After the institution obtains the stable currency, the stable currency is exchanged for legal currency and the legal currency is lent to its users through traditional channels. In this way, the offline market can fully enjoy the value of the assets on the chain, and the value of the assets on the chain will be infinitely amplified. All off-chain debt issuance, underwriting and related businesses will be handled by relevant professional institutions.

Encrypted asset holders will play the role of the fund provider in the agreement, and the token holders will deposit tokens in the fund pool and receive income. Whenever the lending institution returns interest and principal to the agreement, all funds will be repaid to the fund provider in real time.

Therefore, if you want to enlarge the volume of encrypted finance, allow encrypted assets to break the circle into the traditional lending market, and allow more people to benefit from encrypted assets, the excessively high asset mortgage rate is a problem that must be solved. However, it is very difficult to solve this problem purely from the on-chain mechanism. We need to connect the on-chain and off-chain worlds. Goldfinch has given a set of solutions.