Goldfinch Review: A Peer-to-Peer Lending Platform Built on the Ethereum Blockchain
Goldfinch is a decentralized lending protocol built on Ethereum that provides uncollateralized lending to borrowers in emerging markets. The protocol connects borrowers with a pool of investors who provide capital in exchange for a share of the borrower’s future cash flows. Goldfinch aims to democratize access to credit by providing loans to borrowers who would not otherwise have access to traditional financial services, and to offer investors a way to earn high-yield returns by funding loans to creditworthy borrowers.
The protocol uses a reputation-based system to assess borrower creditworthiness and incentivizes investors to perform due diligence on borrowers. Governance of the Goldfinch protocol is managed by a community DAO, which can make decisions such as upgrading contracts, changing protocol configurations and parameters, selecting Unique Entity Check providers, setting the rewards and distribution of GFI, and pausing protocol activity in the event of an emergency.
Fret not! If things are getting technical for you, allow me simplify.
What we are going to learn?
Understanding Goldfinch in Simpler Terms
Goldfinch is a system that lets people borrow money using cryptocurrency as collateral. This means that if you have some cryptocurrency, you can use it to get a loan of a different cryptocurrency.
But Goldfinch is different from other systems because it doesn’t require you to put up more cryptocurrency than the value of the loan. Instead, a group of investors (called “Backers”) provide some of the money for the loan, and they take on the risk if the borrower can’t pay it back.
To make sure everything is safe and fair, Goldfinch uses a system of checks and balances. First, an auditor checks to make sure the borrower is trustworthy and can pay back the loan. Then, the loan is split up between different pools of backers, with the riskiest pool getting the highest returns.
Goldfinch helps people get loans using cryptocurrency as collateral, while making sure everyone involved is protected and the system is fair.
Example: How can you benefit from Goldfinch?
Here’s an example of how you could benefit from using Goldfinch as a borrower: let’s say you want to start a small business but don’t have enough money to get it off the ground. With Goldfinch, you can apply for a loan without having to put up a large amount of collateral. Instead, the platform will use a unique algorithm to determine your creditworthiness and decide whether to approve your loan request.
Once your loan is approved, you’ll receive the capital you need to start your business, and you’ll be required to pay back the loan over time with interest. The interest rates on Goldfinch are typically lower than traditional lending platforms, so you’ll save money on interest payments and have more capital available to reinvest in your business.
On the other hand, as a lender on Goldfinch, you can benefit by providing capital to borrowers and earning interest on your investment. Unlike traditional lending platforms, you don’t need to have a large amount of capital to participate, as you can invest as little as $10 in a borrower’s loan. Additionally, the platform provides risk mitigation features to protect your investment, such as using auditors to ensure the borrowers are legitimate and requiring first-loss capital from lenders.
Goldfinch provides a unique opportunity for both borrowers and lenders to access and provide capital in a decentralized and more affordable way.
Best Features of Goldfinch
No overcollateralization: This means that borrowers do not need to put up collateral that exceeds the value of what they are borrowing, making it more accessible for those who may not have a lot of assets.
Creditworthiness evaluation: Goldfinch evaluates the creditworthiness of borrowers through a network of auditors who assess and approve borrowers based on their financial history and other factors.
Flexible repayment terms: Borrowers have flexibility in repaying their loans, as they can choose the repayment schedule that suits them best.
Decentralized governance: The platform is managed by a community DAO, which allows for decentralized governance votes on important decisions like upgrading contracts, changing protocol configurations, and more.
High returns: Backers who provide capital to the Borrower Pools can earn higher returns than traditional savings accounts or even some other forms of DeFi lending platforms.
How does Goldfinch prevent frauds from happening?
Goldfinch has several measures in place to prevent fraud on its platform. Firstly, they require borrowers to go through a rigorous verification process before they are approved to borrow. This includes verifying their identity, credit history, and other relevant information. Secondly, they use a decentralized auditing system, where auditors are randomly selected from a pool of candidates and have to stake GFI tokens to ensure they are incentivized to act honestly.
In addition, Goldfinch has a Unique Entity Check feature, which makes it difficult for users to create fake identities or collude with others to manipulate the system. This is accomplished by requiring every user to undergo an identity verification process, which prevents sybil attacks. Furthermore, they have a system of backer vetting, where prospective backers are required to go through a screening process and provide proof of funds.
Lastly, Goldfinch has a system of legal contracts, which borrowers and backers can sign off-chain, to provide an additional layer of security against fraud. These contracts can be enforced through legal channels in the event of fraudulent activity.
All of these measures work together to make Goldfinch a robust and secure platform for borrowers and backers to transact.
What is GFI?
GFI is the native governance token of the Goldfinch platform. Holders of GFI have the ability to vote on important decisions related to the platform’s governance, such as upgrades to the protocol, changes to parameters and configurations, and selecting Unique Entity Check providers. Additionally, GFI can be used to earn rewards through the protocol’s staking mechanisms.
Goldfinch (GFI) tokenomics
Goldfinch is a decentralized lending platform that aims to increase access to capital for underbanked communities globally. Its token, GFI, is used as the native currency for the platform and is a vital component of the ecosystem.
The total token supply is capped at 114,285,714 GFI tokens, and the initial allocation of tokens is distributed among various stakeholders. Liquidity providers receive 16.2% of the token supply, with 4.2% allocated to the early liquidity provider program and 4.0% allocated to the retroactive liquidity provider distribution. Senior pool liquidity mining receives 8.0% of the token supply, while backers receive 8.0% of the token supply, with 3.0% allocated to the Flight Academy, 2.0% allocated to the Backer Pool Liquidity Mining, and 3.0% allocated to Backer Staking.
Auditors receive 3.0% of the token supply, while borrowers receive 3.0% of the token supply, and contributors receive 0.65% of the token supply. The community treasury receives 14.8% of the token supply, while the early and future team receives 28.4% of the token supply. Finally, Warbler Labs receives 4.4% of the token supply, while early supporters receive 21.6% of the token supply.
It is worth noting that there is currently no inflation, but it is expected that the protocol will incorporate modest inflation after three years to reward active participants. This will ultimately be up to the community to discuss and decide.
According to me, the GFI tokenomics appear well thought out, with a significant allocation of tokens dedicated to incentivizing liquidity providers and backers, who are the lifeblood of the platform. The community treasury also ensures that there is room for growth and development in the future. The long-term commitment of early supporters is a good sign for the platform’s sustainability, and the incorporation of inflation rewards should incentivize continued participation in the ecosystem.
How to buy GFI?
GFI can be purchased from Coinbase, Uniswap MEXC, and Gemini. If you are an US resident, you can choose use Coinbase and Gemini. If you are from India and other countries, you can use MEXC. If you are a fan of decentralisation, you can buy GFI from Uniswap.
GFI On Chain Analysis:
The price of GFI has decreased by 35.94% in the past 180 days, and its all-time high (ATH) was $32.94, while its all-time low (ATL) was $0.45.
Goldfinch’s circulating market cap is currently $29.11m, which has increased by 42.05%. Its fully diluted market cap is $81.89m, which has increased by 25.48%.
The revenue for the past 30 days is $96.10k, with an annualized revenue of $1.17m, which has increased by 1.02%.
The total value locked is $2.55m, which has increased by 56.61%. The P/F ratio (fully diluted) is 7.04x, an increase of 37.1%, while the P/S ratio (fully diluted) is 67.15x, an increase of 35.1%.
The borrowing volume (annualized) is $101.37m, which has increased by 0.40%, and the fees for the past 30 days are $916.34k, with an annualized fees of $11.15m, which has decreased by 0.24%.
Goldfinch’s treasury is $16.84m, which has increased by 14.73%.
Goldfinch has an average of 8.60 daily active users and an average of 7.10 active developers in the past 30 days. The code commits in the past 30 days have decreased by 65.4% to 64.
It’s worth noting that while the price of GFI has shown some recent increases, it has also had a significant decrease in the past 180 days. Additionally, while the total value locked has increased significantly, there has been a decrease in the annualized fees over the past 30 days.
Goldfinch Funding and Investors
The Bay Area startup has closed $25 million in funding from Andreessen Horowitz’s crypto arm. Other backers include Coinbase Ventures, SV Angel, Blocktower, Bill Ackman and Heli-cap. Founders Mike Sall and Blake West previously worked together at Coinbase before starting Goldfinch in July of 2020. The firm raised an $11 million funding round last June.
Goldfinch has raised $25 million in funding from several high-profile investors. The funding round was led by Andreessen Horowitz’s crypto arm a16z, with participation from Coinbase Ventures, Blocktower, SV Angel, Heli-cap and Bill Ackman.
Goldfinch’s founders, Mike Sall and Blake West, who previously worked together at Coinbase, raised an $11 million funding round in June 2021.
With this latest funding, Goldfinch aims to expand its team and continue developing its platform to offer decentralized lending to underserved communities around the world.
Does Goldfinch perform credit checks?
Goldfinch doesn’t perform traditional credit checks, such as credit scores, to determine a borrower’s creditworthiness. Instead, it relies on Auditors to assess the borrower’s ability to repay the loan based on other factors, such as their business model and financial projections. The Auditors’ job is to ensure that the borrower has a viable business plan and a clear path to generating revenue that can be used to repay the loan.
How does Goldfinch handle governance and decision-making?
Goldfinch is managed by a community DAO (Decentralized Autonomous Organization) and has a decentralized governance system that allows users to make decisions and vote on important matters related to the platform. This includes upgrading contracts, changing protocol configurations and parameters, selecting Unique Entity Check providers, setting the rewards and distribution of GFI, and pausing protocol activity in the event of an emergency.
The governance system is designed to be highly transparent, with all proposals and votes publicly visible. The voting process is weighted by the amount of GFI tokens held by each voter, so those with more tokens have a greater say in decision-making.
The goal of this governance structure is to ensure that the platform remains responsive to the needs and desires of its users, and that changes are made in a transparent and democratic way.
How does Goldfinch aim to expand access to capital?
Goldfinch aims to expand access to capital by creating a single global credit marketplace on the blockchain. This means that borrowers from anywhere in the world, including small businesses and individuals who were previously excluded from traditional lending markets, can access capital through the Goldfinch platform.
By using blockchain technology, Goldfinch is able to lower costs, increase efficiency, and reduce barriers to entry, which can help expand access to credit and financial services to underserved communities.
Additionally, by enabling anyone to become a lender on the platform, Goldfinch is creating a more decentralized and democratic system for capital allocation.
What types of borrowers can use Goldfinch, and what are the requirements?
Goldfinch is designed to expand access to credit to underserved borrowers worldwide. It provides borrowers with an alternative to traditional lending institutions, which may not be accessible or available in their regions. Borrowers on the Goldfinch platform range from individuals to small businesses to large institutions, with a focus on those who are typically overlooked by traditional financial institutions.
Goldfinch has a few requirements for borrowers, including a credit assessment process that evaluates factors such as cash flow, collateral, and the borrower’s reputation. The platform also requires borrowers to provide an upfront deposit of 10% of the loan amount, which is returned to the borrower when the loan is repaid. This deposit serves as a form of collateral and helps ensure the borrower has skin in the game.
In addition to the credit assessment and deposit requirement, Goldfinch has several eligibility criteria, including compliance with anti-money laundering (AML) and know-your-customer (KYC) regulations, legal documentation of the borrower’s entity, and meeting minimum credit score thresholds.
Final Conclusion: Why I invested in GFI in 2023?
First of all, I liked Goldfinch as a product. Next, I like the investors who have invested int his project. When a project is backed by top investors, you know there is something in the project, and that increases the chances of the project to succeed in long run.
Next, the marketcap is small, and not many are yet talking about it and this is when I like investing. In long run, it gives you better returns.
Okay, and now most importantly, the onchain analysis. I found the project while researching on crypto projects that are generating positive revenues and fees for atleast 90 days period.
Goldfinch earned $487.3k in the last 7 days, and $916.3k in the last 30days. This is close to 12M generated in revenue per year. There are not many crypto project that makes such revenue, but comparatively have a much higher marketcap.
Disclaimer: This article on Goldfinch is based on the research I personally made, and not an investment advice. Please DYOR before investing in GFI.