There was so many insights/alpha that was shared on the
@goldfinch_fi
twitter spaces last week, where we had
@aaronherawan
come on and speak. Summarizing a few main takeaways I had below 👇
1
11
26
Replies
First of all, what is
@goldfinch_fi
? Goldfinch is a decentralized credit protocol for crypto loans to real businesses. Their vision is to expand access to capital in emerging markets where crypto can empower financial inclusion.
1
0
3
Players like Goldfinch are incredibly important for both DeFi and tradfi. For DeFi, Goldfinch opens up a new asset class on-chain that provides sustainable yields over the long term because these are coming from real interest rate payments from business borrowers.
1
0
3
In fact, Goldfinch actually provides one of the highest yields on USDC stablecoins in DeFi, without having to rely on reflexivity of incentives, and is uncorrelated with the rest of the crypto markets. This may be one of the best options to park for stablecoin yields because...
1
1
4
...many of the fully liquid high yield returns that we saw in DeFi over the last few years is only possible when crypto prices are going up, which can disguise asset appreciation as yield.
1
0
3
For tradfi, Goldfinch creates finance supply chains from scratch and streamlines some of the fee extractive intermediary steps. In addition, they provide access to capital because many local banks in emerging markets don't know how to underwrite loans w/ tech risk.
1
0
5
Goldfinch can link up lenders who can and want to underwrite that risk, in dollar-denominated loan pools from anywhere in the world, to borrowers who are starved for capital needed for their high-growth business. This is especially important for Asia, the epicenter of fintech.
1
0
3
Fintechs in Asia have often had to bootstrap their loan products with equity, because venture markets were still hot, but over the long-term, this can't scale because there is a) a mismatch between expected rate of return on equity (100%) and rate of return on debt (~20%).
1
0
2
b) it's much more challenging to get equity financing in these market conditions. This is why on-chain debt provided by Goldfinch can fill this gap with dollar-denominated loans, and provide lenders with the right risk reward exposure investing in businesses in Asia.
1
0
3
HOWEVER, raising in US dollar is still a temporary solution b/c there isn't proper foreign currency matching, or better asset liability matching for businesses outside of the US. As more and more local capital comes into the crypto markets for this use case...
1
0
3
...local stables will be an imperative to scale. Businesses' revenues, expenses, etc. aren't in dollars, and USD is just another store of value uncorrelated with their local currency. USD stables are NOT the long-term solution to bringing local wealth on-chain.
1
0
3
That's why we're building local stablecoins with
@BluejayFinance
. We want to enable the currency primitives for growing use cases like real world asset lending, which will be critical to the long-term health of the DeFi ecosystem.
1
1
6