TrueFi

TrueFi (TRU) is a decentralized lending protocol that was launched on November 21, 2020, on the Ethereum platform. It was created to bridge the gap between traditional and decentralized finance by offering uncollateralized lending services. TrueFi was initially funded in 2018 by TrustToken, the company behind the TUSD stablecoin, through SAFT token sales to venture capital institutions and accredited investors, raising over $31 million.

TrueFi's development focused on progressive decentralization, with the goal of becoming a market-driven, automated credit rating and lending system. The protocol uses a hybrid DAO model, relying on a real-world foundation to manage off-chain tasks and putting major decision-making power in the hands of TRU token holders through binding on-chain voting.

Since its inception, TrueFi has made significant strides in the DeFi space. It has originated over $1.7 billion in loans to more than 30 borrowers and paid out over $40 million in interest to protocol participants. Borrowers include leading crypto-focused institutions and real-world firms such as fintech companies, trading firms, and credit funds.

TrueFi's credit model is governed by holders of the TRU token, who are responsible for borrower onboarding and loan approval through staking. This model allows for uncollateralized lending by assessing borrowers' creditworthiness through an on-chain credit-rating system. The protocol has grown significantly, with plans to deepen its integration with traditional financial institutions and expand its reach in the DeFi space.

TrueFi (TRU) is a decentralized lending protocol that connects lenders, borrowers, and portfolio managers via smart contracts governed by the TRU token. Here's how it works:

• Lenders: Retail and institutional lenders from both crypto and traditional finance sectors use TrueFi to find risk-adjusted returns. They can earn interest and TRU by adding assets to lending pools.
• Borrowers: Borrowers, including crypto-native institutions and real-world firms, can access loans through TrueFi. They are processed through a credit assessment and can select from various stablecoin options for their loans.
• Portfolio Managers: These managers control lender selection and manage portfolios, ensuring that lenders are matched with suitable borrowers.

• TRU Token: The TRU token is the main utility token for TrueFi, built on the Ethereum blockchain. It is used for lending activities, fee payments, and participating in farming and staking features.
• Staking: Stakers of TRU tokens provide loss protection to lenders and govern the future of the protocol through binding on-chain voting. Staking allows users to earn passive rewards without giving up ownership of their digital assets.
• Farming: Users can earn high yields by providing liquidity to network smart contracts. APY rates change for farming pools, leading to higher ROIs in certain conditions.

• Proof-of-Reserve Consensus: This mechanism ensures transparency and validity for all parties involved.
• On-Chain Credit Scores: Borrowers can build on-chain credit history, which improves their access to funding in the future.
• Lender Protection Mechanisms: TrueFi employs a liquidation procedure to ensure lending pools remain solvent, and lenders receive repayment in a timely manner. Additionally, stakers of TRU tokens provide protection against defaults.

• High Yields: Users can secure high-yield rewards on their stablecoin loans securely.
• Low Rates: Borrowers save on lending rates compared to centralized alternatives.
• Privacy: TrueFi offers publicly-anonymous borrow applications using zero-knowledge proofs.
• Scalability: The protocol is designed to be fast and scalable, making it ideal for institutional and enterprise-level clientele.

• Institutional Integration: TrueFi plans to deepen integration with traditional financial institutions and improve its protocol and lending products to match institutional finance controls.
• DeFi Integration: The protocol is making its loans and portfolios compatible with the ERC-4626 standard, allowing for greater composability with other DeFi opportunities.

Overall, TrueFi provides a decentralized, efficient, and scalable lending platform that connects lenders, borrowers, and portfolio managers, offering competitive returns and robust protections for lenders.

TrueFi (TRU) has several strengths that contribute to its success as a decentralized finance (DeFi) credit protocol:

1. Predictable and Transparent Yields: TrueFi offers lenders predictable and transparent yields on both real-world and crypto-native lending opportunities, ensuring that lenders have a clear understanding of their returns.

2. Accessibility and Programmability: By bringing debt infrastructure on-chain, TrueFi makes credit more accessible, transparent, and programmable, allowing for a wider range of financial opportunities.

3. Governance and Decision-Making: The TRU token holders have significant governance power, enabling them to approve new portfolio managers and borrowers, manage treasury and partnership decisions, and participate in on-chain voting.

4. Diverse Financial Opportunities: TrueFi provides a marketplace for lenders, borrowers, and portfolio managers, offering a diverse range of financial opportunities including emerging market investing, fintech financing, real estate investing, and gig worker lending.

5. Institutional Integration: TrueFi is designed to bridge the gap between DeFi and traditional finance, allowing for deeper integration with institutional investors and providing features like tranching and capital formation periods to cater to their needs.

6. Security and Protection: The protocol offers protection to lenders through staked TRU, which can be slashed in case of defaults, ensuring that lenders are covered against losses.

7. Flexibility and Liquidity: TrueFi allows lenders to exit their loan positions anytime, providing liquidity and flexibility in managing their investments.

8. Transparency and Reporting: The protocol offers real-time tracking of loaned dollars and improved reporting features, ensuring that lenders and managers have access to detailed information about their investments.

These strengths have contributed to TrueFi's success as a leading DeFi credit protocol, offering a robust and efficient platform for lending, borrowing, and managing assets.

TrueFi (TRU) faces several risks in its credit lending business. These risks include:

• Competition: TrueFi faces competition from other credit lending projects, which could erode its market share and impact its business model.
• Regulatory Risks: Tightening regulatory measures in the crypto sector have led to a contraction in credit demand, which could negatively affect TrueFi's business.
• Non-Performing Loans (NPLs): TrueFi's risk management mechanism for NPLs has not yet been fully tested, and the protocol's NPL rate may not remain zero, especially during repayment waves.
• Credit Risk: TrueFi's credit lending model relies on robust risk management, which includes a thorough Know Your Business (KYB) workflow and credit review. However, this process is not foolproof, and borrowers may still default on loans.
• Market Volatility: TrueFi's business is highly cyclical, and its valuation is similar to traditional cyclical stocks. This means that its business size may shrink in a bear market, leading to deteriorating indicators such as PE and PS.
• Default Protection: While TrueFi has a default protection mechanism that slashes up to 10% of staked TRU tokens to compensate affected lenders, this protection is currently insufficient to cover the outstanding bad debt on the platform.
• Staking Risks: TRU stakers act as a risk management system for TrueFi's lending pools. In the event of a default, a certain percentage of staked TRU can be liquidated and transferred to the affected lending pool, potentially resulting in losses for stakers.

These risks highlight the challenges TrueFi faces in maintaining a robust credit lending business in the decentralized finance (DeFi) sector.

• Rafael Cosman: Co-Founder & CEO of TrueFi, graduated from Stanford University and previously worked as an Engineer at Google.
• Alex de Lorraine: COO & Sr. Director, Finance at TrueFi.
• Tom Shields: Chairman of the Board at TrueFi.
• Tory Reiss: Co-Founder of TrueFi.
• Jai An: Co-Founder of TrueFi.
• Stephen Kade: Co-Founder of TrueFi.