TrueFi: Uncollateralized Lending for DeFi.

As decentralized finance, DeFi continues to make waves globally, TrustToken led by CEO and Cofounder, Rafael Cosman has launched TrueFi, a DeFi protocol for uncollateralized lending using stable coin, TUSD. Simply put, you can now borrow without collateral and/or lend with high yield using DeFi. It is that simple, enjoy juicy and sustainable interest rates by lending to borrowers who have no collateral, on agreed terms with full transparency.

TrueFi is a decentralized finance protocol that allows vetted borrowers to seek or apply for loans. Stakers of TRU(the native token of TrueFi) determine the creditworthiness/ reliable of the uncollateralized borrower. Upon approval of the loan application, lenders earn high fixed rate on their loan capital while also farming TRU token. TrueFi aims to advance in it’s uncollateralized lending by expanding the set/group of borrowers, expanding the types of loan approved, improving the efficiency of the credit prediction market and progressively decentralize. The first uncollateralized loan proposal was made on TrueFi by CEO, Alameda of Ftx Exchange, view here.

TrueFi Architecture

• Lenders add True USD into TrueFi pool for uncollateralized lending, earning interest and farming TRU.
• Uncollateralized borrowers submit loan applications/proposals to borrow capital from the TrueFi pool. This proposal would include the loan amount requested, fixed rate, fixed tenure, terms and conditions and a unique Ethereum address to receive the approved loan.
• TRU stakers vote (YES/NO) on the loan approval based on the creditworthiness of the borrower.
• Pool smart contract approves/rejects loan application based on the pool’s risk parameters and TRU stakers' votes.
• Borrower repays loan (principal+interest) as agreed or face disrepute and litigation.
• Lenders can withdraw profits plus farmed TRU bonus while stakers who voted rightly receive bonus TRU.

Risks of Uncollateralized Lending

Though uncollateralized lending could have better rates than collateralized lending, there are two major risks to uncollateralized lending:

• Possible risk of loss: Collateral usually mitigates loss of borrowed capital in collateralized lending. This is not the same however for TrueFi protocol as trusted borrowers only have to meet a high level of creditworthiness for a loan proposal to be approved, without any collateral involved. In this case, a default in repayment would only result disrepute and litigation. If TrueFi loses the lawsuit, lenders would lose a portion or full value of their loan capital.
• Lower liquidity: While most DeFi protocols allow for instant withdrawal/unstaking, TrueFi won’t allow such flexibility as uncollateralized borrowers agree to fixed-rate and tenure for repayment. Uncollateralized lenders have to lock up their loan capital for the fixed tenure. However, instead of instant withdrawals, TrueFi offers an alternative, for lenders to sell their share of the outstanding loan in form of pool tokens. The price of the pool tokens would be determined by the market.

Why TrueFi?

• Uncollateralized lenders get high fixed rate on their loaned TUSD or Crypto assets.
• Uncollateralized lenders get Erc20 pool tokens when their capital is approved for lending. This Erc20 pool tokens represent their claim to the principal + interest due for repayment to the loan pool.
• TrueFi transparently displays all information to lenders.
• Only creditworthy loan applications are vetted by TRU stakers and approved by the pool.
• TRU farming can be done by staking liquidity pool tokens with TrueFi.

For more information on TrueFi, visit the website.