GoldFinch’s Growth Shows How DeFi Can Help TradFi

    • Goldfinch, a real-world credit protocol, records its highest revenue day since launch.
    • Real-world DeFi to TradFi protocols like Maple Finance and Centrifuge are setting a growing trend.

    Bitcoin is not traditional finance’s biggest enemy, decentralized finance or DeFi is. DeFi is that part of cryptocurrencies and blockchain technology that is challenging the traditional financial order. Not only does DeFi have cheaper and easier options, but it’s doing things that traditional finance (TradFi) cannot do.

    One such example of a DeFi protocol that’s taking away TradFi’s pie is Goldfinch. The real-world financing platform with DeFi rails is making big waves in terms of revenue growth. This is indicative of a larger move of DeFi replicating and enhancing basic TradFi objectives.

    Real World Revenue

    Goldfinch is a decentralized lending protocol, but not for crypto borrowers. The protocol provides borrowing capital for real-world businesses, mainly in developing countries with a social objective. Some of its customers include moped taxi financiers in East Africa and induction stove makers in India.

    The protocol generates lending capital on crypto using DeFi rails, creates protection pools in case borrowers fail to pay, and sends the capital to borrowers. Essentially, Goldfinch is providing capital infrastructure to emerging market businesses through Defi. In exchange, the protocol receives 10% of all interest and 0.5% of the withdrawal fee. And the data from Token Terminal suggests Goldfinch recorded its highest daily revenue earlier this week.

    Source: Token Terminal

    On May 2, the protocol generated over $270,000 from fees paid by borrowers. On a cumulative basis, the revenue of the protocol is $2.8 million. At the beginning of 2022, cumulative revenue was less than $500,000. However, at this time, the token’s price is down by 50%. This could be due to tokenomics not aligning with the protocol’s performance or the overwhelming drag of the crypto markets since then.

    Even with the GFI token not looking healthy, Goldfinch’s work cannot be ignored. In addition to this prowess, Goldfinch is on the brink of a rapidly developing market – the bridge between DeFi and TradFi.

    TradFi <> DeFi

    Many protocols are working on integrating the functionalities of DeFi with the large total addressable market (TAM) of TradFi. Maple Finance is doing this with lending to institutional investors, Centrifuge through its real-world assets market, and Jenny DAO with fractionalized NFT markets.

    This is likely to balloon into a whole new industry going forward. The reason for this is DeFi protocol and founders know that the only way to bring more people into DeFi is by expanding the market. And the closest expansion of the DeFi market will be to the adjacent TradFi market.

    The TradFi market is ripe for the picking because of the need to innovate and the inability of the current infrastructure to allow innovation. Lending rates in fiat currencies are at a decade low, but the asset size is ballooning. And the borrowing need of traditional investors is rising, especially if this borrowed capital will be deployed in the high stable rate market of DeFi.

    Goldfinch satisfies one market need – stable lending and DeFi’s on and off-ramps. There are several other potential pitfalls like credit risk, smart contract risk, and more. But the larger point is the ability of a protocol to provide capital to a company providing cookers to a small household in India, or a taxi service in Nigeria. This form of DeFi is only going to grow in the coming years.

    Aakash Athawasya
    Aakash is a market analyst at Vauld. He looks at on-chain data of Bitcoin, ETH, and the macroeconomic effect of crypto on the equity and commodity markets.

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