Goldfinch

Goldfinch Finance attempts to solve the overcollateralization challenge in crypto lending by introducing a new method for assessing trustworthiness based on the participants’ voting and support. The protocol includes four actors: Borrowers, Liquidity Providers, Backers who provide first loss capital and Auditors who assess the borrowers.

Liquidity Providers supply the main Senior Pool to earn a passive income. This Senior Pool is accessible only by the Liquidity Providers. To get a loan Borrowers do not directly interact with the Senior Pool. Instead, they create smart contracts called “Borrower Pools” detailing the amount, interest rate, payment period, due date, and late fees. If the contract is sound, Backers invest in them by providing a first loss capital. After enough Backers show their support and a certain capital is raised, the Senior Pool starts to allocate resources to the smart contract, leveraging the Backers as well as the Borrower. As a final step, Auditors provide a human-level check on the Borrower by using off-chain and on-chain data to detect any malicious activity. Once they decide the Borrower is not fraudulent, they vote accordingly, and the loan is granted to the borrower. If the Auditors approve, the loan is granted based on the repayment schedule initially offered in the smart contract.

The protocol went live on Ethereum in February 2021, giving out $1 million worth of loans. Version 1.1 was deployed a month later in March 2021, and soon after the project received a $11 millions in funding from Andreessen Horowitz. In October 2021, the protocol partnered with Nexus Mutual to offer the chance to buy smart contract insurances for Liquidity Providers and Backers.