Hello everyone, today I want to tell you about how the Goldfinch protocol is working.
For starters Goldfinch is a decentralized credit platform for crypto loans without collateral. This project launched the Goldfinch Flight Academy in which training is in full swing. The Goldfinch protocol has four core participants: Borrowers, Backers, Liquidity Providers, and Auditors. Borrowers — Participants who raise capital from the protocol via Borrower Pools. Backers — Participants who supply junior tranche (first-loss) capital to individual Borrower Pools. Liquidity Providers — Participants who supply capital to the Senior Pool. Auditors — Participants who receive GFI rewards for securing the protocol with a human eye. This is how this system looks in the diagram.
In short, it works like this: Borrowers seek financing, and they propose Borrower Pools for the Backers to assess. Borrower Pools contain the terms a Borrower seeks, like the interest rate and repayment schedule. Backers assess the Borrower Pools and decide whether to supply first-loss capital. After Backers supply capital, Borrowers can borrow and repay through the Borrower Pool. 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.
Thank you for your attention and see you soon.