Increasing access and interoperability on Goldfinch Finance

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Background

Goldfinch Finance is a decentralized credit protocol that enables stablecoin borrowing using real world collateral, with a mission to expand access to capital and foster financial inclusion. By bringing off-chain yield on-chain, it allows anyone to become a lender to businesses around the world – not just banks.

Goldfinch is tackling a hard problem in a massive market, and is unique within DeFi because the sources of yield enabled by the protocol come from real-world loans that are uncorrelated with the rest of the crypto ecosystem. I got super excited about Goldfinch when I first heard about it, and wanted to get involved with the community and protocol governance.

GIP-01

I collaborated with a small working group to propose a governance initiative to the Goldfinch community leveraging Goldfinch’s two ERC20 tokens:

  • GFI, the core token of the Goldfinch Protocol, used for community governance, community grants, incentives, and more
  • FIDU, which represents an interest-bearing stablecoin deposit in Goldfinch’s diversified Senior Pool, redeemable for USDC

Our proposal GIP-01 proposed:

  • Creating a FIDU-USDC pool on Curve
  • Allocating GFI incentives for those who provide FIDU-USDC liquidity on Curve and stake their LP positions on Goldfinch

The proposal passed following some discussion with other community members, and the FIDU-USDC pool on Curve now has close to $7M in liquidity. Following the latest protocol update, participants can receive GFI rewards by staking their FIDU-USDC-F Curve LP positions on Goldfinch.

Here are the main reasons why we made this proposal to improve Goldfinch:

Expanding interoperability

Interoperability is a key advantage in crypto. It helps protocols increase adoption and strengthens communities by broadening access, exposure, and use cases. As an ERC20 token representing an interest-bearing stablecoin deposit, FIDU has the potential to become deeply integrated with the rest of DeFi (similar to Compound’s cTokens). Its relative stability and increasing exchange rate for USDC over time (as interest payments are made back to the protocol’s automatically diversified Senior Pool) are characteristics that make FIDU an attractive place to store and grow capital.

There are exciting potential future use cases for FIDU across DeFi such as collateralization and index inclusion, but the first step is to create a liquid secondary market. With the introduction of the FIDU-USDC Curve pool, these new use cases are now possible for the community to propose and implement.

Stickier capital

Previously, Goldfinch lenders could only move out of their Senior Pool positions by withdrawing USDC from the Senior Pool and incurring a small withdrawal fee. Because the majority of USDC in the Senior Pool is usually already utilized for real-world loans, there was a potential scenario where lenders would not be able to exit their full position until more USDC had been returned to the pool.

Now, lenders on Goldfinch can move more freely in and out of their senior tranche loan positions by simply swapping FIDU for USDC. This means more USDC will remain available in the Senior Pool for future loans — resulting in stickier capital for the protocol and a smoother experience for borrowers.

Increasing access

Exposure to FIDU (which earns 5-9% USDC APY + 15-25% GFI APY) was previously only available to those who supplied capital to the Goldfinch Senior Pool directly, which is currently limited to non-US individuals and US accredited investors – a limiting factor for the growing community that wants to support Goldfinch’s vision of a decentralized real-world credit platform. The FIDU-USDC pool’s perhaps most-important community benefit will be allowing people to get yield exposure to the Goldfinch Senior Pool by simply acquiring FIDU on Curve.

In conclusion

While we’ve experienced some turbulent times in crypto recently, Goldfinch’s core metrics have been growing steadily (recently surpassed $100m in total active loans). Its capital growth and yields have been uncorrelated with the broader crypto ecosystem, which is a testament to the power of the unique access that the protocol enables between crypto and the real world.

With the introduction of FIDU-USDC Curve LP incentives, Goldfinch has taken steps to become more interoperable with the rest of DeFi and expand access to more people who believe in the vision of decentralized lending.

I’ve been really impressed with how Goldfinch’s mechanism design and community incentives encourage long-term participation, and I’m excited to contribute further to the protocol.

Thanks for reading, and you can learn more about Goldfinch here.

Many thanks to @emilyh for partnering with me on creating and implementing the proposal, as well as Goldfinch community members @nisa, @mans9841, @mcegor13, and @Igor for driving thoughtful discourse and feedback.

Thanks also to RenGen Global, Hack VC, Hazoor Partners, Cyrus Karbassiyoon, and Stratos Technologies for being early LPs in the Curve liquidity pool.