Crypto loans in the real world
There is a crypto loans platform called Goldfinch, which “brings crypto loans to the real world.” In February 2021 it had $1M in loans on its books, but by April 2022 that had grown to $100 million. Founder, Blake West, says that this growth shows “there’s a dire need for unsecured capital, especially in the developing world.” He added, “Goldfinch is offering these real loans that are tied to real world activity [and] still has really good yields.”
Of course unsecured loans, especially to smaller borrowers,
come with risks attached. Aside from the most obvious one of defaults on loans, there is also the risk of regulatory bodies bringing in new rules to safeguard borrowers, and the volatility of the crypto market. West says Goldfinch’s loans are not tied to demand within crypto, so the rates deviate from those stemming from demand to yield farm, for example. Instead the protocol makes loans to companies like Greenway, which distributes highly efficient and safe cookstoves in India. Overall, it is making loans in 18 nations, including Brazil and Kenya.
Goldfinch’s model has attracted some major investors, such as Andreessen Horowitz. It led a $25 million investment round for the start-up in January this year. A16z General Partner Arianna Simpson said Goldfinch was positioned to bring DeFi lending to borrowers in emerging economies who lack collateral to obtain conventional loans. She said, “Goldfinch is a decentralized credit platform that broadens the pool of potential lenders beyond just banks.”
Significantly, Goldfinch is seeing a number of fintechs using the platform as borrowers, so they can facilitate loans in their respective fiat currencies. West says the next step for these fintech companies is to lend directly to their customers’ wallets.
And in response to the risks around unsecured loans, West said, “Basically all the loans we do are secured and in fact are collateralized.”
Goldfinch’s $100M milestone suggests credit protocols with real world utility are emerging as a new growth area in crypto. West said, “I don’t think people in the crypto markets quite understand that this is where the growth in DeFi is gonna come from.”