TrueFi V5: 2021 in Review & Lending Engine Upgrade
Celebrating TrueFi’s first year and first $1B in loans, and looking to 2022
DeFi’s first unsecured loan was made by TrueFi to Alameda Research for $3.5 million on November 21st, 2020. Since that historic moment, the TrueFi protocol has continued to grow rapidly, hitting $1 billion in Total Value Locked (TVL) in August 2021.
Two months later, the protocol reached $1 billion in total loans originated on November 12th 2021, just in time for the protocol’s one year anniversary. Since the protocol’s launch, it has maintained a default-free repayment rate and TrueFi’s lenders have collected approximately $8.5m of interest.
Meanwhile, users holding TRU in over 5000 individual wallets — in addition to thousands more across exchange partners like Coinbase, Binance, and FTX — have now participated in dozens of governance votes, guiding the direction of the protocol.
In both protocol development and adoption, TrueFi is off to a great start — but the protocol’s progress to date is just the beginning. With the traditional global lending market estimated to be worth $6 trillion, TrueFi will leverage the value of decentralized trust, transparency, and speed to bring more of this market on-chain.
To that end, TrueFi is built on the conviction that two revolutions are coming to lending:
- First, that the speed, cost-savings, and transparency provided by blockchain technology will eventually bring the majority of all global lending on-chain.
- Second, that the capital efficiency of uncollateralized lending will eventually cause it to exceed the total value locked (TVL) of over-collateralized lending in DeFi, all powered by effective credit scoring & underwriting.
To facilitate these shifts, TrueFi must scale capital throughput dramatically, both at the level of individual loans and in the breadth of lending. This is the focus of TrueFi’s V5 upgrade, which features major borrower experience improvements, as well as prototyping support for 3rd party asset managers who will launch their own TrueFi pools. It also coincides with the launch of the new BUSD lending pool, under TrueFi’s existing lending strategy.
With that, let’s explore the upgrades coming in V5, which we’re colloquially calling the Lending Engine upgrade. Once you’ve looked over all the features, join the TrueFi community in Discord or on Telegram to ask questions and suggest the next priority features.
Prototyping the TrueFi Lending Marketplace
TrueFi’s grand vision is to become the protocol for global lending. To date, TrueFi has been a closed garden, limited to lending to opportunities with the best risk-adjusted returns to crypto-native borrowers who can quickly move from expressing interest in a loan to actively having capital at work.
These borrowers have helped battle-test the TrueFi protocol and have made the next era of TrueFi possible: opening TrueFi to 3rd party asset managers who will construct entirely new lending pools, servicing brand new types of borrowers.
What does this mean for TrueFi? Let’s try an analogy: the launch of the first iPhone featured three primary 1st party apps, in the form of Phone, Music, and Photos/Camera. These distinct features were unprecedented in a single device — the same way on-chain unsecured lending and credit scoring is groundbreaking for DeFi — but the iPhone’s true potential was realized with the launch of the App Store. This allowed 3rd party developers to launch products approved by (but not created by) Apple, leading to successes like maps, games, on-demand goods and services, and much more.
TrueFi’s upcoming launch of the “lending marketplace” is the protocol’s way of opening itself up to independent developers and 3rd party asset managers, who will have more flexibility than ever to build new technical and financial products on TrueFi’s lending infrastructure.
Around the same time as TrueFi’s V5 upgrade, TrustToken aims to test this 3rd party support by being the first to launch an independent lending pool on the protocol. With the proposal of the TrustToken Asset Management lending pool, designed to offer B2B loans under different terms than the existing TrueFi pools, TrustToken will take on the risks and complexities of making 3rd party support work seamlessly to build the best possible platform for future asset managers wanting to launch new financial products through TrueFi.
TrustToken is working with a number of asset managers to help them onboard to TrueFi, and if you’re an asset manager or developer who’d like to build on TrueFi, we’d love to help you get started — click here to reach a member of the TrustToken team about launching a new TrueFi pool.
As the first independent pool is tested and the protocol is gradually refactored to support more sophisticated 3rd party contributions, we expect to have more to share on TrueFi’s lending marketplace upgrade by early 2022.
V5: The Lending Engine Upgrade
In TrueFi V4, we were proud to introduce a prototype for Lines of Credit (LoC), which, once approved by the community, would offer borrowers ongoing, self-serve capital access at dynamic market rates. Since then, a number of distinct components of TrueFi’s LoC upgrade are now ready to be propagated to TrueFi at large, each of which frees capital to move more quickly and in greater quantity through TrueFi.
Important note: these features will roll out gradually over the 2–3 months, only after passing technical audits expected to be completed by December, in keeping with our primary commitment to safety and security.
Automating Loan Rating
At the core of the Lending Engine upgrade is the automation of loan interest rates. The credit model will be automated and ready to act as the primary means for setting a borrower’s lending limits, rates, and terms. Since the launch of credit scoring in V3, dozens of new loans have made the lending model more rigorous, as supported by TrueFi’s robust Q3-Q4 lending activity and the protocol’s perfect repayment rate. It’s expected this upgrade will dramatically speed up TrueFi lending throughput, letting the protocol put more capital to work.
This has important implications for TRU holders. While the community will remain key in approving borrowers, lending pools, and governing the direction of the protocol at large, voting with TRU to approve individual loans will no longer be necessary, in favor of voting for adjustments to the credit model that will make these decisions at scale.
While community voting on loans was always intended to bootstrap this automated credit process, community sentiment on voting also supports deprecating this feature of TRU, which was found to often result in gas costs outpacing TRU rewards and requiring a level of day-to-day TRU holder participation that to some felt unnecessarily cumbersome.
V5 also introduces an all-new utility for the TRU token that is expected to create new demand among borrowers:
Borrower TRU Staking
To determine a borrower’s creditworthiness, the TrueFi lending rate model uses both on-chain data (like trading record, liquidity, and repayment history) and off-chain information (such as company background and operating history) to compute a score from 0–255. After community onboarding, this score then sets the terms of a borrower’s activity on TrueFi. This score may slowly increase each time the borrower repays TrueFi loans, grows its assets under management, or reduces its leverage — and in turn, the borrower’s debt ceiling on TrueFi also increases.
Most borrowers, however, would like this process greatly expedited: with the right strategy, the more capital they can borrow, the more profits they can generate — so for some borrowers, taking months to make and repay small loans to increase their TrueFi credit score is poor return on time.
V5 introduces a new way of improving a borrower’s available credit by allowing whitelisted TrueFi borrowers to stake TRU to raise their credit limit and improve their rates. Borrowers who stake TRU will enjoy an improvement in the size and terms of their loans so long as their TRU remains locked up. In case of default on a loan, the SAFU fund will have the discretion over the borrower’s staked TRU.
One-Click Borrowing
With TrueFi loans now capable of being approved instantly by the automated rating model, TrueFi will be able to support one-click borrowing. This upgrade trims an approved borrower’s wait for capital from TrueFi’s current 2–7 day voting period to as little as 30 seconds — or the time of an Ethereum transaction.
One-click borrowing will dramatically decrease the friction of borrowing on TrueFi, which is likely to grow TrueFi’s lending pool utilization and by extension, lender interest, while hopefully also setting a new bar for the DeFi borrower experience.
At launch, one-click borrowing will be supported only for TrueFi’s top-rated borrowers, with credit scores above 200 (out of 255).
Under Audit: Slower is Faster
TrueFi has maintained a commitment to user safety since long before our Nov 2020 launch. Among TrueFi’s many investments in the safety of user funds is a tradition of auditing code before launch, as has been the case for all major protocol upgrades to date — and will remain the case for our V5 upgrade.
While the V5 upgrades described above are code-complete, current audit schedules will allow us to deploy the changes no earlier than January 2022. During this time, TrueFi will not be slowing down: the core team continues to build V6 features, recruit new partners, contributors, and borrowers, as well as grow the breadth and depth of our community.
As a doubling-down on our investment in safety and technical excellence, TrustToken is immortalizing this commitment as our newest company value. Long held by our partners at EthWorks, who are now a part of the TrustToken family following our September 2021 acquisition, we add Slower is Faster to our four other values.
If this value speaks to you, you can learn more about how TrustToken works and explore open roles here.
New Lending Pool: BUSD
Recently approved by governance vote and launching in time for TrueFi’s 1 Year anniversary, TrueFi will be launching a new BUSD lending pool, following the protocol’s existing lending strategy serving crypto-native borrowers favoring a market-neutral or otherwise appropriately hedged approach.
The community approved the BUSD pool for “aggressive” TRU incentives, totaling 40,000 TRU per day in incentives for a minimum of two weeks. The BUSD pool incentives will be reexamined at the end of two weeks, and may be further increased, extended, or tapered down.
Join the new BUSD pool on the TrueFi app today: app.truefi.io/lend
TrueFi in 2022
In TrueFi’s first year, the protocol hit $1B in Total Value Locked and $1B in Loan Origination Value — all while serving only a small segment of the niche crypto-native borrower market.
With the global lending market valued in the trillions of dollars, TrueFi’s second year is about going well beyond crypto, lending to an increasingly more diverse pool of borrowers and putting capital to work in higher orders of magnitude.
Scaling rapidly will require similarly dramatic levels of change to the protocol, including broadening the scope of collaborators to include independent asset managers and developers, refactoring the product to become ever more open source and decentralized, and relying ever more on a growing community of TRU holders to lead, improve, and advocate for TrueFi.
Ready to join the movement? Get started as a community member, lender, builder, borrower, or teammate below:
👮♀️ Community: If you’re ready to join the front lines, TrueFi’s TRUpers are rallied in the TrueFi Discord and Telegram channels, with regular reports from our Twitter. New to all this? Get started with our Litepaper.
🧑🌾 Earn: Start earning interest and farming rewards by lending your stablecoins on the TrueFi App today.
👷♀️ Build: Want to build on TrueFi, as either an asset manager or technologist? The TrustToken team would love to help you get started.
👩💼 Borrow: Running a business with at least $10m in assets under management? You may be eligible to borrow on TrueFi. Apply today and get access to capital in as little as 7 days.
🧑💻 Join TrustToken: Ready to join a pioneering Web3 team building a billion dollar company? See why we think TrustToken is a great place to build a career.
