The essence of cryptocurrency lending is the same as that of conventional lending. The borrower requests funds from the lender or investor to provide these funds under certain conditions. Usually, the borrower, in addition to information about himself, usually provides information about the possibility of securing the loan.
The cryptocurrency market is not an exception in the field of cryptocurrency lending there is still a principle, which is the main stumbling block for getting a loan in cryptocurrency. All decentralized financing organizations require potential borrowers to have the fact that there is mandatory loan collateral in crypto-assets. Naturally, the bulk of potential borrowers and investors were deprived of the opportunity to use the cryptocurrency lending system, until the Goldfinch protocol was launched.
In a few words, Goldfinch is a decentralized financial system, uniting borrowers and investors in one platform. Unlike similar platforms, Goldfinch does not require crypto-assets. Borrowers' solvency within the platform is assessed by the platform members themselves.
The creators of Goldfinch call this principle: "Trust through consensus". Based on this principle, according to the terms and conditions of the platform, the borrower himself voices the terms on which he is willing to receive a loan, and the investor, in turn, decides whether to allocate funds for this loan or not.
The principles of the protocol are that all financial flows are transparent and statistics are available in full to each participant in the system. The system is self-regulating and the balance of relationships, interest rates, terms, reward, and punishment systems are set by the users themselves.
Users can be roughly divided into four main groups:
- Borrowers
- Sponsors
- Liquidity providers
- Auditors.
When we speak about borrowers and auditors everything is clear from the name. The borrower came to get a loan, the auditor checks that the borrower is not fraudulent and generally secured for the amount requested.
Both sponsor and the liquidity provider are investors, but with different functions. The sponsor takes the decision to issue a loan and also analyzes the total pool of loans, receiving for that quite a material profit, and the liquidity provider makes a one-time investment and receives his interest from the system's work for a long time.