A new frontier in trust minimized, scalable onchain lending
The Credit Guild is the first lending pool to remove oracle risk and reduce trust assumptions in governance from honest-majority to honest-minority.
It offers major advantages over existing DeFi lending pools:
Resilient to market manipulation attacks
More efficient liquidity management
Supports a vastly higher diversity of loan types
Veto rights and bad debt markdown protect passive lenders
Why Build the Credit Guild?
Today’s leading onchain lending pools are optimized for the “happy path” – honest governance, correctly functioning oracles, successful liquidations, efficient interest rate markets.
As longtime DeFi users, we’ve seen how these systems can fail under adversarial conditions. The Credit Guild seeks to build a lending marketplace that inherits the full security of Ethereum, with no shortcuts or compromises.
Credit is built for the hard days.
What is Credit v1?
Credit v1 is an open source platform for constructing lending markets. It can support any denomination of debt, any collateral asset, and a wide variety of loan terms.
The protocol uses two governance innovations to reduce trust in tokenholders and increase scalability:
Optimistic governance. It’s easy to propose changes to the protocol, but also easy to veto proposed changes, making governance much more efficient while eliminating 51% attack risk
First loss capital staking. Active lenders can allocate market liquidity among the approved loans in real time, producing a more efficient, market based risk and rates strategy compared to existing lending pools.
These mechanisms offer both lenders and borrowers a more efficient experience, with reduced risk of governance attacks or oracle failures. Credit v1 can scale to support more different collateral assets, loan durations, and interest rate models than any existing pooled lending market.
Skin in the Game
Existing DeFi governance is a tragedy of the commons. Many protocols struggle to attract sufficient voting quorums given the time and capital costs of voting. Others see tokenholders accepting bribes to vote for onboarding obviously toxic assets, and must scramble to correct this after the fact. By enforcing slashing in the event of losses to the protocol, and rewarding stakers in proportion to the protocol’s earnings, a radically more incentive-compatible governance is possible.
Removal of trusted price feeds
Lending markets that use trusted, real time oracle price feeds are decentralized in name only. A software error in the offchain oracle infrastructure (or in many cases, action by a centralized multisig) can cause a loss to users faster than governance can possibly react. Major lending pools often hardcode the price of staked ETH and similar assets due to the potential danger of market manipulation, but in doing so expose themselves to loss if a slashing event occurs. The Credit Guild doesn’t need to make this tradeoff.
What’s next?
Credit v1 is launching on Arbitrum on Friday, April 19, 2024. Arbitrum was selected because of its history of successful operation, demonstrated commitment to decentralization, and high level of adoption for decentralized finance.
At launch, the available debt markets will include USDC, USDT, and ETH. GUILD rewards will be available for lenders, borrowers, stakers, and liquidators. At launch, borrows will be capped to ~$2m per market while the protocol proves itself in production, and raised weekly.
Following a successful launch, new debt markets will be launched, and instances of the protocol will be launched on additional rollups, starting with Base.
Learn more about the protocol on Gitbook, join us on Discord to ask questions and keep up with announcements, or launch the dApp here (please note that at time of writing, this link points to the Sepolia test instance, the real market will be available at the same link on April 19).