Introducing Goldfinch: Crypto Loans Without Collateral

Mike Sall
Published in
5 min readFeb 2, 2021


We are excited to announce Goldfinch, a protocol building one of the biggest missing pieces of DeFi: loans without collateral. We believe this is the crucial step that finally opens crypto lending to the majority of the world. By decentralizing the process, DeFi can unlock an entirely new layer of underwriting capacity by allowing anyone to be a lender, not just banks.

To get there, we’re starting in emerging markets, which have the most unmet demand. Since launching in December, the protocol has already deployed $1M in capital to thousands of borrowers across Mexico, Nigeria, and Southeast Asia.

We’re just getting started, and we can’t do it alone. Get involved by joining us on Discord, reaching out on Twitter, and subscribing for updates. (We’re also hiring!)

Why loans without collateral matter

In the past month, the total amount borrowed across crypto networks passed $4B, up from less than $200M a year ago. Yet even this growth dramatically underestimates the true potential of DeFi. That’s because all of this lending is overcollateralized. For every $1.00 someone borrows on these networks today, they must first put up ~$1.50 of another asset they already own.

This collateral requirement holds the whole system back. These loans are only useful for a sliver of borrowers — primarily margin traders and crypto holders who don’t want to sell their positions. But for everyone else in the world, the reason they want to borrow in the first place is they don’t already have the money they need.

Removing this collateral requirement is key to crypto breaking out into global debt markets. DeFi has a massive opportunity to transform access to capital, but it will only be possible once it can make loans without collateral. That’s what will finally open crypto lending to most people in the world. And that’s what we’re building at Goldfinch.

Unlocking the untapped underwriters

Enabling loans without collateral is just the first step. The second step is doing it through a decentralized network that allows anyone to participate. We believe this will foster a whole new level of lending activity that can’t get funded today.

Traditionally, it’s expensive for banks to underwrite because they don’t know their borrowers. This sets a threshold for the kinds of lenders that can operate, and it cuts out the long tail of what’s possible. We spoke with one person in Bogota, for example, who wants to finance motorcycle purchases for people doing deliveries on foot, and another person in Nairobi looking to make micro loans within their community. They need $50K, or even just $5K to get started. But they don’t have the capital, and it isn’t worth the banks’ time.

But what if the community could power this?

What if we could remove the overhead of banks and offer these opportunities to the collective judgment of people around the world? There’s a vast untapped layer of underwriting potential from the thousands, if not millions, of people who can identify and assess new sources of credit. By decentralizing the underwriting process, DeFi can allow anyone to lend in a way that banks simply can’t today.

Starting with emerging markets

From the beginning, we wanted to build for the borrowers who can benefit most and where crypto can have the greatest impact. This led us to start with lending businesses in emerging markets. They have the most to gain (and the highest demand) because the inefficiencies of traditional finance limit the capital that can flow into these markets. It’s also where crypto truly shines with its liquidity and international reach.

To that end, we’re proud to share that the protocol launched in December with several highly reputable lending businesses participating, including PayJoy in Mexico, QuickCheck in Nigeria, and more to be announced. They all have years of strong performance and are looking to grow, now with the help of crypto.

So far, they have collectively drawn down $1M from the Goldfinch protocol and deployed it to thousands of their end borrowers. And it’s having an immediate impact. To list a few examples, the capital is being used to help people buy smartphones in Mexico, cover short-term expenses in Nigeria, and purchase equipment for business operations in Vietnam.

How the protocol works

The protocol works by extending credit lines to lending businesses. These businesses use their credit lines to draw down stablecoins from the pool, and then they exchange it for fiat and deploy it on the ground in their local markets. In this way the protocol provides the utility of crypto — specifically, its global access to capital — while leaving the actual loan origination and servicing to the businesses best equipped to handle it.

On the investor side, crypto holders can deposit into the pool to earn yield. As the lending businesses make their interest payments back to the protocol, they’re immediately disbursed to all investors.

Where we’re headed

This is just the beginning. Our vision is to build a decentralized credit platform that empowers anyone in the world to be a lender, not just banks. Here’s how we plan to do it:

Phase 1: Credit Fund on Crypto
The current version of the Goldfinch protocol operates like a credit fund, except on crypto. To start, we’re serving as the first underwriter evaluating lending businesses and setting the terms. This takes the critical step of making this real-world source of yield available on chain and composable with the rest of DeFi.

Phase 2: Decentralized Underwriter Network
The protocol will enable anyone to underwrite. Underwriters will be able to assess businesses and stake junior debt capital on them. In return for doing this work, they’ll receive higher yields via commissions from passive senior debt investors. This will allow the protocol to scale the underwriting process and onboard new lending businesses entirely through the community.

Phase 3: Long Tail of Lenders
The protocol will support smaller and smaller lenders who don’t already have loan servicing infrastructure to the point where anyone can make loans, even individuals. The protocol will do this by bringing end-user loans on chain, providing self-serve lender tools, and building upon a vibrant underwriter marketplace.

Join us on our mission

We can’t do it alone. It will take a strong global community to build this together, and we want to hear from you. We’re especially interested in folks who want to help fund and assess these early lending opportunities.

Join us on Discord, reach out on Twitter, and subscribe for updates. We’re also hiring!

You’ll be in good company. To support our early efforts, we raised $1M in funding and brought on an amazing group of backers and advisors.

They include: Kindred Ventures, Coinbase Ventures, IDEO CoLab Ventures, Stratos Technologies, Alex Pack (cofounder Dragonfly), Eric Weingarten (former Coinbase Head of Product Legal), Jesse Walden (Variant Fund), Jill Carlson (Slow Ventures, cofounder Open Money Initiative), Morgan Beller (cocreator Diem), Premal Shah (cofounder Kiva), Robert Leshner (founder Compound), Spencer Noon (Variant Fund), and Tarun Chitra (Founder Gauntlet) — among others.

We’re just getting started, and we can’t wait to build this with you!



Mike Sall

Cofounder at @Goldfinch_fi. Previously Head of Product Analytics at @Coinbase, Head of Data Science at @Medium.