Research Summary
This report provides an in-depth analysis of Goldfinch, an open-source credit protocol built on Ethereum that focuses on decentralized lending in emerging credit markets. It covers the protocol’s performance, recent credit events, new initiatives, and future plans. The report also discusses the role of various participants in the Goldfinch ecosystem, including Liquidity Providers (LPs), Backers, and Borrowers, and the use of real-world assets (RWA) as collateral to insulate loans from crypto volatility.
Key Takeaways
Goldfinch’s Performance and Credit Events
- Loan Balance and APY: Goldfinch’s outstanding loan balance has decreased by 1.8% YTD, with one new origination of a 90-day callable loan to Fazz. The Senior Pool APY has remained flat YTD, averaging 7.8% throughout the third quarter.
- Credit Events: Goldfinch experienced its first two credit events in 2023, including a technical default and a pending write-down. The community treasury and Warbler Labs stepped in to offset the losses.
- Trading and Yield: As of September 30, FIDU was trading at 81c on Curve, representing a 52% implied yield for holders if the loans are fully repaid on time.
Goldfinch’s “DeFi For The World” Initiative
- User Experience: Goldfinch aims to simplify the UX of digital wallets through its “DeFi For The World” initiative, eliminating the need for usernames, passwords, or private keys.
- Passkeys and Collaboration: Goldfinch adopted Passkeys for authentication and collaborated with Turnkey to make Passkey signatures compatible with Ethereum.
Goldfinch’s Future Plans
- Warbler Labs’ Blueprint: Warbler Labs has introduced a visionary blueprint for Goldfinch, aiming to evolve it into a decentralized operating system for lending.
- Fee Structure: Goldfinch plans to implement a fee structure that doesn’t erode the margins of other lending businesses, offering underwriting and AUM fees instead of traditional protocol interest fees.
Goldfinch’s Challenges and Community Response
- Credit Events: Goldfinch faced challenges with its first two credit events in 2023, but the community’s swift responses demonstrated the adaptability of the Goldfinch community.
- Market Discount: The widening FIDU market discount could attract long-term investors willing to navigate associated risks.
Goldfinch’s Role in the Broader RWA Sector
- Tokenized Asset Coalition: Goldfinch joined hands with industry leaders to form the Tokenized Asset Coalition, dedicated to advancing onchain infrastructure.
- Transformative Potential: Goldfinch recognizes the transformative potential of tokenized RWAs, offering efficiency, transparency, and cost-effectiveness surpassing legacy systems.
Actionable Insights
- Investigate the Potential of Goldfinch: Given the resilience and adaptability demonstrated by the Goldfinch community in the face of credit events, it may be worthwhile to explore the potential of this decentralized lending protocol.
- Consider the Opportunities: The widening FIDU market discount could present an opportunity for long-term investors willing to navigate associated risks.
- Monitor the Progress: Keep an eye on Warbler Labs’ blueprint for Goldfinch and its potential to reshape the protocol into a decentralized lending operating system.
