Goldfinch is a decentralized credit protocol that provides crypto-based loans to real-world businesses.

The platform is aiming to solve a key problem associated with the DeFi space: overcollateralized loans. While overcollateralized loans may be a non-issue for professional traders holding large swaths of digital assets, they present a clear and obvious barrier for brick-and-mortar business in need of funds not currently at their disposal. By eliminating hefty collateral requirements, Goldfinch believes they can make digital assets a staple of the global debt market.

Goldfinch’s native token is GFI. It’s used to confer voting rights within the project’s community DAO, and works as a means of rewarding various stakeholders for operating on the platform. 

According to the project’s whitepaper, Goldfinch relies on a decentralized collective of liquidity providers, backers, borrowers, and auditors to effectively raise and allocate capital across the platform.

All liquidity deposited on Goldfinch is placed into one of several Borrower Pools that consist of both a senior and junior tranche. Liquidity providers supply funds to the senior tranche, while the platform’s decentralized network of ‘backers’ work to fund junior tranches.

Both backers and liquidity providers are granted a tokenized yield to compensate for the opportunity cost associated with locking up funds for an extended period of time.

Funds held within Goldfinch’s network of senior tranches are placed there by the project’s Senior Pool. Liquidity providers first lock their funds into the Senior Pool which uses a proprietary “leverage model” to allocate the capital across different Borrower Pools in an efficient manner.

According to documentation, the Senior Pool distributes funds at a rate proportional to the number of backers supporting a given Borrower Pool. The more backers a Borrower Pool has, the more tokens that pool is allocated.

Like other tranche style frameworks, assets held within the junior tranche are considered first-loss capital, meaning backers are first in line to lose their capital should a borrower go awry. As compensation for this increased risk, backers are said to earn a higher yield relative to the liquidity providers that fund Goldfinch’s less-risky senior tranches. 

All borrowers on the network must first be verified by Goldfinch’s network of auditors who work to assess the creditworthiness of each potential applicant. Borrowers are also tasked with proposing new borrower pools - and their conditions/terms (interest rate, payment period, late fee, etc.); however, it is ultimately up to backers/liquidity provides to supply the corresponding funds.

To date, Goldfinch has provided capital to nearly 200,000 borrowers across Kenya, Mexico, Nigeria, and Southeast Asia.

When was GFI created and how much was it worth?

Goldfinch was created in July of 2020 by co-founders Mike Sal and Blake West. Per The Block, the pair originally met while working at Coinbase where Sal was employed as a product analyst and West a backend engineer.

In June of 2021 Goldfinch announced that had procured an initial $11 million in funding from industry giants Andreessen Horwitz. Roughly 6 months later - in January of 2022- the project disclosed a further $25 million Serie A funding round which saw capital sourced from the aforementioned Andreessen Horwitz as well as Coinbase Ventures.  

Goldfinch’s native token, GFI, was first released (in its entirety) to various platform stakeholders on January 11, 2021.

Pricing data from CoinGecko indicates that GFI first traded at a price of $11.50 before increasing nearly 200% to an all-time high of $32.94 within 24 hours of its initial distribution. The token’s price has been on the decline ever since. As of July 2022 - with macro headwinds raging - GFI was swapping hands for just $0.83.

How is the price of GFI determined?

GFI is currently a deflationary asset with a cap of 114.29 million tokens. Per Messari, 28.4% of the token’s initial supply was distributed to Goldfinch’s core development team, while an additional 21.6% were earmarked for the project’s early backers. Some 16.2% was granted to liquidity providers, whilst another 14.8% was allocated to Goldfinch’s community treasury. Remaining supply was dished out to the platform’s network backers, auditors, and borrowers as well as Warbler Labs, an independent organization tasked with supporting the protocol.

Although supply is currently capped, Goldfinch expects that GFI will be subject inflationary mechanics within the next three years. 

Why does GFI have value?

Goldfinch’s value proposition is two pronged. Liquidity providers/backers will find value in the protocol’s ability to generate a hefty annual yield, while borrowers will likely be enticed by Goldfinch’s un-collateralized, crypto-denominated loans.

Given GFI’s role in facilitating governance, demand for the token will likely grow as network usage increases.

Is GFI secure?

Goldfinch currently operates on the Ethereum ledger. While the original “network of networks” is often bashed for a lack of scale, its various security mechanisms are generally considered to be robust in nature. 

Likewise, all borrowers on the platform are first assessed by Goldfinch’s decentralized network of auditors.

What are the main benefits of GFI?

Goldfinch is aiming to solve one of DeFi’s key problems: the prevalence of over-collateralized loans.

Goldfinch provides un-collateralized, crypto based loans to real world businesses.

Both liquidity providers and backers can earn a tokenized yield by locking funds onto Goldfinch. 

Goldfinch leverages a decentralized network of auditors to assess the creditworthiness of each individual borrower.

What do the critics say about GFI?

In 2022, Goldfinch’s total value locked has dropped 90%. As of July 2022, the protocol’s TVL was standing at $1.9 million down from the $30.02 million mark it had reached just 7 months prior, DeFi Llama explained.