ocused on the crucial missing piece in DeFi of loans without collateral. The vast majority of borrowers in the world can’t actually borrow on DeFi today because it requires overcollateralization with crypto. By removing that collateral requirement, though, the Goldfinch protocol can unlock an entirely new level of borrowing capacity. This is what will finally allow crypto to break out into global debt markets.
We are also announcing our Backer Program. This is an incentivized program we will pilot over the coming months, and it’s the first way for the community to start participating directly in the protocol. Even beyond Goldfinch, it’s the first time DeFi users will be able to provide crypto loans directly to emerging market borrowers. You can sign up here to be one of the first to participate and learn more as we roll out the program.
Finally, we can now point to the Goldfinch whitepaper that forms the basis for the protocol. Undercollateralized loans remain one of the biggest open challenges in crypto today, and this paper shows how the Goldfinch protocol solves it. The protocol uses a unique approach that centers around the principle of “trust through consensus” and has the ability to scale in a fully decentralized way. We encourage people who are passionate about this problem to join us on Discord and share your feedback.
We’re excited to partner with the a16z crypto team and a number of other backers who share in our vision. This gives us the resources we need to build on the protocol’s momentum. Since launching a few months ago, the protocol has grown 2.5X with loans extended to borrowers across 7 countries: India, Indonesia, Mexico, Nigeria, Singapore, Thailand, and Vietnam. Our mission is to build a decentralized credit protocol that expands financial inclusion, and this is just the first step. We’re now hiring to help the Goldfinch protocol grow to the next level — join us!
How the Goldfinch Protocol Works
Today we can also point to the Goldfinch whitepaper that forms the basis for the protocol. As we’ve shared in prior posts, our mission is to build a decentralized credit protocol that empowers financial inclusion. To get there, the core challenge is enabling crypto borrowing without requiring crypto overcollateralization.
The whitepaper presents an approach that achieves this in a fully decentralized way. The protocol does this by using the concept of “trust through consensus”: that borrowers can show creditworthiness based on the collective assessment of other participants, rather than based on their crypto assets.
The protocol can then use this collective assessment as a signal for automatically allocating capital. By removing the need for crypto collateral and providing a means for passive yield, the protocol dramatically expands both the potential borrowers who can access crypto and the potential capital providers who can gain exposure.
The protocol will launch in stages through a closed beta and then progressively decentralize. The first release enables Backer participation, and we just submitted it for audit last week. We will then iteratively release new components of the protocol design outlined in the whitepaper until it is fully decentralized. We encourage people who are passionate about this problem to join us on Discord and share your feedback.
Announcing the Backer Program
As described in the whitepaper, the protocol “Backers” are an integral participant, perhaps the most important. We will be launching an incentivized program for the community to participate as Backers in the first deals on the protocol.
Not only is this a major development for the protocol, but it’s also the first time that DeFi users will be able to provide crypto loans directly to emerging market borrowers.
We will share more details in the coming weeks, but in the meantime you can sign up here.
$11M Funding Led by a16z
To help us reach our mission, we have raised $11M led by a16z, along with a number of new investors including Mercy Corps Ventures, A Capital, SV Angel, Access Ventures, Divergence Ventures, Defi Alliance, Draft Ventures, Balaji Srinivasan, Wale Ayeni, Ryan Selkis, Jason Choi, Josh Hannah, Lisa Cuesta, Viktor Bunin, and others.
It’s an amazing group of people with a broad set of backgrounds — from builders in the crypto space, to veterans of tech startups, to experts in emerging markets.
This follows significant growth of the Goldfinch protocol. Since launching in January, the protocol has grown 2.5X and is now serving tens of thousands of end borrowers across 7 countries: India, Indonesia, Mexico, Nigeria, Singapore, Thailand, and Vietnam.
With these new resources, we are significantly growing the team. We have several new job openings — join us in bringing crypto loans to the real world!
Read More : Newsletter — June 17, 2021
Sell in May and go away! In hindsight, this was certainly our motto over the last few weeks.
That being said, we can see that a violent market correction has presented a buy opportunity as a way onto the crypto train. One could argue as well that the DCA approach (dollar cost average) is definitely a pertinent tool to average your entry without causing too much worry about the behaviours of short-term prices.
On our side, we have suffered from this correction from a commercial standpoint and are currently working on new strategies to diversify the DAF exposure and minimize the drawdowns. This also results from the discussion with our clients on looking to minimizing the pain points (volatility, draw down) of crypto investment, rather than optimizing the returns.
Market & strategies analysis
May was a very volatile month for the crypto markets. The first part of the month was marked by a strong Ether rally ahead of the implementation of EIP 1559 (London Fork). Then the Bitcoin market began to correct, coming out of a multi-week consolidation pattern and ultimately taking the entire market with it. A violent wave of liquidation followed, pulling many highly leveraged players out of the market. We see this sharp decline as the conclusion of a consolidation process that began at the end of February, and we believe that the bullish rally could resume quickly. On the other hand, it would mean that the bull market is behind us.
From a macroeconomic point of view, the signs of a return of inflation are multiplying with a drastic increase in prices across all commodities. The Fed’s move this week will be a matter of close scrutiny as the tone could change to a much less accommodative policy amid persistent signs of inflation. However, ten years of very low rates have pushed many institutional players to use a lot of leverage on fixed income in order to be able to meet their yield commitments. As a result, central banks now have limited margins to hike rates without triggering a new financial crisis, which suggests that inflation could come back much stronger than many people anticipate, and in this case hedging assets like cryptos could be very attractive.
Regarding our strategies, if the first part of the month was very profitable with a good capture of the Ether rally, the second part of the month was more complicated. The U turn was very rapid, and our weekly strategies did not have time to exit their longs and suffered a lot, in consequence the absolute performance strategies were neutral and failed to capitalize on the short side, even though they ended the month with a decent positive performance. We are currently working on making long-term strategies more reactive in order to be able to neutralize some of the exposure more quickly. We also hope that our scenario for exiting the consolidation phase materializes and provides a more favourable environment for our trend monitoring strategies.
This month, we have been quite affected by the market correction (see our strategies review above) and commercial activity (with some redemptions due to quick take profit mirroring the investors’ anxiety). Here is the DAFs’ picture as of June 14th 2021:
- DAF#1: 1.95M€
- DAF#2: pending
- DAF#3: 1.71MUSDT
- DAF#4: 1.59MUSDT
- DAF#5: 1.49MUSDT
- DAF#6: 0.24MUSDT
- DAF#7: 1.31MUSDT
- DAF#8: 0.18MUSDT
- DAF#9: 16.8M$
- Super DAF (pool): 0.05MUSDT
Marketing & Business development
As said, our websites revamping is still a work in progress and we will certainly link our different communities through the role of the NPX token, notably towards NapBots and Crypto Army.
We have participated in several conferences and articles and have received some positive feedback and reverse solicitation. We plan to increase our presence through more upcoming articles and a recurring podcast (planned for September).
The pool is now fully implemented, which is definitely good news. We firmly believe that the liquidity will increase in the coming months with our product, sales and marketing efforts.
We are currently focusing on 3 main pillars: intensifying our marketing (including the website revamping), opening our strategies’ library to decorrelated new ones and pushing our sales effort more internationally. Our goal is to capture the next bull run with our products and sales coverage.
As usual, please feel free to contact us on our Telegram channel should you have any questions.
Arnaud, Jean-Charles and the team.
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