Introduction to TrueFi (TRU): DeFi’s Leading Credit Protocol

UTC by John Caroline · 7 min read
Introduction to TrueFi (TRU): DeFi’s Leading Credit Protocol
Photo: TrueFi

Let’s find out more details about TrueFi (TRU), a cryptocurrency lending uncollateralized protocol. The project has emerged as a leading credit protocol in the DeFi space.

In the blockchain world, loads of transactions are executed on a daily basis, and a need arises for a better lending option so as to have an efficient, quick, and open investment system.

Blockchain startups understand that providing the DeFi space with a better lending option is an innovation that would boost the efficiency of the space and its productivity. In addition, efficient credit protocols will be able to take the space a step further to reaching mainstream appeal.

In a bid to provide a solution to liquidity issues limiting the crypto space, projects like TrueFi (TRU) have been created. The TrueFi team designed a structure that enables the free operation of the protocol. The project runs freely under the authority of its TRU token holders.

TrueFi Defined

Decentralized finance (DeFi) is one of the major aspects of blockchain, with its transactions surpassing those of other financial institutions. In its quest to provide an alternative to traditional financial services, DeFi welcomed a project TrueFi, since this lending protocol offers loans and credit.

TrueFi is simply a protocol that offers uncollateralized cryptocurrency lending services. It was built by the TrueFi team to solve the transaction challenges that the blockchain technology couldn’t provide on its own, using the blockchain infrastructure.

The adoption of TrueFi by DeFi has progressed over the years, as it has not only increased the efficiency of borrower’s capital but has also helped in maintaining one of the industry’s underwriting records.

The advantage TrueFi has over other traditional financial services is that TrueFi lays emphasis on lenders and not borrowers.

The TrueFi Roadmap

TrueFi is on a mission to become a leading and the most widely adopted and trustworthy protocol for uncollateralized lending on a blockchain. Hence it has sought to carefully build its protocol in phases toward the accomplishment of its stated goals.

While in its first phase of development in late 2020, the first version of the TrueFi protocol was launched and TRU tokens were issued. This phase only allowed institutional borrowers access to the lending services after completing KYC/AML review, followed by the mandate to sign a legally-enforceable loan agreement. Also, new borrowers were only eligible for a limited amount of loan offers.

The second phase kicked off during the first quarter of 2021. At this time, the protocol launched new features to further enhance its functionalities. Here, it launched the liquid exit feature to allow lenders to exit the TrueFi Lending Pool directly into the asset that the lender used to enter the pool. This phase also saw the protocol releasing an improved staking model and the full launch of its on-chain governance. It provided stakers the opportunity to easily stake on the overall protocol rather than being forced to stake on individual loans.

Furthermore, the third phase of its development began in the second quarter of 2021. This stage saw TrueFi debuting additional USD-backed stablecoins to the protocol. The provided stablecoins included USD Coin (USDC) and Tether (USDT).

The team went further to implement a more robust credit model for onboarding borrowers. As a result, the launch of exclusive Lines of Credit and tradable loan tokens took place.

TrueFi proceeded to the fourth phase of its roadmap during the third quarter of 2021. Here, the protocol extended support for arbitrary ERC20 tokens such as WBTC pool, WETH pool, and the likes. Thereafter, TrueFi progressed into allowing lending pools to provide liquidity on all Loan Tokens and line-of-credit tokens, where it further offered other protocols access to participate in Loan Token and Line-of-Credit primary fundraising.

How TrueFi Works

TrueFi as a financial utility gives crypto lenders the privilege to earn rewards, as well as provides borrowing, lending, and managing assets services. It does so by putting up such funds for borrowers.

Lenders put their cryptocurrency in a pool that depends on 3 categories of stakeholders: lenders, borrowers, and portfolio managers.

As required of every blockchain-based network, TrueFi has its own token – TRU. This cryptocurrency serves as a means to pay for transactions on the network and as a share in exchange for a reward.

TrueFi Lenders, Borrowers, and Portfolio Managers

These are the three categories of stakeholders in TrueFi:

  • TrueFi lenders. Lenders (institutional and retail) in the crypto and local finance sectors are trying to find the best less risky yields for loan capital. And TrueFi offers such an opportunity. TrueFi has an app that allows its lenders to review pools and portfolios they are qualified for. Then the lenders make decisions based on their risk and return preference. The lender’s selection is controlled by portfolio managers, this is acceptable and permitted by TrueFi because not all portfolios are available to every lender. Notably, TrueFi has a flexible exit of loans for its lenders. It provides coverage for leaders by the 10% of staked TRU value often slashed in default cases. In addition, TrueFi SAFU (secure asset fund for users) offers coverage for affected lenders with reserve funds.
  • TrueFi borrowers. TrueFi credit committee decides if borrowers are eligible to borrow on TrueFi or not after a rigorous screening that reviews both off-chain and on-chain data. TRU holders then vote to approve or decline borrowers’ applications. Successful approval of a borrower’s application leads to loan issuing from any of TrueFi DAO pools. Most borrowers depend on TrueFi for capital because it is fast and once the application is approved, borrowers get their loan almost immediately.
  • TrueFi portfolio managers. Portfolio managers have access to global liquidity all day with cost savings benefits and transparency. There is a similarity between being a borrower and a portfolio manager in TrueFi as both demand approval.  Before portfolio managers can be listed on the TrueFi app, they must have been approved and reviewed.

TRU Token

All decentralized lending protocols rely on input from token users, TrueFi was not an exception. TRU is TrueFi’s token which uses a DAO model with a reliance on the real world to manage off-chain tasks such as action collections and tax filings.

The TrueFi token is based on the Ethereum blockchain. The protocol puts major decision-making power in the hands of TRU holders through binding on-chain voting.

Benefits of TrueFi

TrueFi offers a wide range of benefits to its users:

  • Anytime exit. TrueFi operates with exit liquidity, which gives stakers full asset control and provides lending protocol with no lockup period constraint.
  • Returns are competitive. On a growing asset rate, TrueFi provides high and competitive returns in decentralized finance.
  • Protection of defaults. TrueFi SAFU’s fund and its token (TRU) stakeholders provide an assurance of stakers’ loan assets.
  • Creditworthiness evaluation of borrowers. TrueFi borrowers undergo a tedious vetting process ranging from community approval to signing of a loan agreement with a legal binding.
  • By the users and for the users. TrueFi gives full control to TRU holders by giving them the freedom to approve new borrowers and gives them a say on important TrueFi treasury and partnerships.

Bottom Line

TrueFi has successfully become one of the best-used cryptocurrency lending platforms as it has so far provided efficient lending services for DeFi users.

However, investing in TrueFi could demand caution considering the fall of other cryptocurrency lending protocols (like Celsius) which were unpredicted. This suggests that lending protocols could be liable to unexpected crashes.

Share:

FAQ

What is TrueFi?

TrueFi is a decentralized crypto currency lending marketplace where lenders, borrowers, and portfolio managers come together to utilize uncollateralized credit lending services.

How does TrueFi function?

TrueFi offers lending, borrowing, and asset management infrastructures. TrueFi as a marketplace provides solutions to the needs of its user groups. The TrueFi token (TRU) relies on stakers to protect lenders against loss. The stakers include lenders, borrowers, and portfolio managers.

How did TrueFi appear?

TrueFi was created when there was a need for an improved lending protocol since the global lending market uses an outdated financial infrastructure making investment expensive and slow. As a result of this investing, options are scarcely available to retail investors.

Since blockchain technology could only move and allocate capital but couldn’t provide an assessment of borrowers’ credit and onboard real-world collateral, the need for a protocol that can offer these arose. In a bid to provide a solution, the TrueFi team then came up with this structure which operates freely as directed by TRU token holders. 

What makes TrueFi special?

The specialty of this structure over others is its focus on lenders rather than borrowers, unlike in other traditional financial institutions.

What is the TRU token?

TrueFi has a token known as TRU, it offers exclusive utilities for stakers and TrueFi is governed by the holders of TRU.

What are the advantages of the TrueFi protocol?

Amongst many others, some of the advantages of TrueFi includes the anytime exit of stakers, ultimate transparency, competitive returns and more.

guides
Ultimate Guide to Blockchain Security January 29th, 2023

The consistent surge in cyber-attacks has triggered concerns for blockchain security. Here is all you need to know about blockchai...