Getting to Know Goldfinch

Goldfinch is a protocol that creates one of the biggest missing parts of DeFi: unsecured loans. The developers believe that this is a decisive step that finally opens access to cryptocurrencies for most countries of the world. By decentralizing the process, DeFi can open up a whole new level of underwriting opportunities, allowing anyone to be a lender, not just banks.

How the protocol works

On the investor side, crypto holders can deposit into the pool to earn yield. As the lending businesses make their interest payments back to the protocol, they’re immediately disbursed to all investors.

Key differences between Senior Pool LP and Sponsor roles

Liquidity Providers supply capital to the Senior Pool in order to earn passive yield. The Senior Pool uses the Leverage Model to automatically allocate capital to the Borrower Pools, based on how many Backers are participating in them. When the Senior Pool allocates capital, a portion of its interest is reallocated to the Backers. This increases the Backers’ effective yield, which incentives them to both provide the higher-risk first-loss capital and do the work of assessing Borrower Pools.

Lastly, Auditors vote to approve Borrowers, which is required before they can borrow.
Auditors are randomly selected by the protocol, and they provide a human-level check to guard against fraudulent activity.

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