How TrueFi Is Transforming DeFi Zero-Collateral Loans

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by Julia Sakovich · 5 min read
How TrueFi Is Transforming DeFi Zero-Collateral Loans
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The final phase of the TrueFi launch should initiate the beginning of a highly functional, cross-chain uncollateralized lending platform, equally able to serve institutions, retain users, and lend to other protocols.

Defi took off in 2020 in a major way, with applications such as decentralized exchanges and decentralized lending exploding in popularity. Existing DeFi lending platforms are focused on collateralized lending, an obvious choice for peer-to-peer use, but have not expanded on their lending capabilities.

This is where TrueFi comes in, aiming to become the industry standard for blockchain-based uncollateralized lending – like an enterprise-grade credit card. Using the platform’s native cryptocurrency, TRU, and its dollar-backed stablecoin, TUSD, TrueFi will have first-mover advantage in this untapped sector of the market.

What’s the Difference Between Collateralized and Uncollateralized Lending?

Some of the most prominent DeFi applications on the market, including MakerDAO, AAVE, and Compound, allow for decentralized lending, but only if the borrower puts up collateral – usually in excess of the amount they take out. These platforms create a situation where the borrower doesn’t have to sell their cryptocurrency to put it to work in the DeFi ecosystem. This has created opportunities for retail users to function as micro-banks, granting risk-adjusted loans in exchange for an agreed rate. TrueFi wants to take the DeFi lending industry to the next level, and take another big bite out of the banking sector.

TrueFi is the first uncollateralized lending platform (aside from AAVE flash loans) in DeFi, currently serving respected crypto-native institutions. The borrowing firm will sign a legally enforceable loan agreement with TrustToken, Inc to take out a loan, then let TrueFi users assess whether or not the borrower’s request fits within their risk tolerance threshold for a loan.

This all takes place on the TrueFi forum via a New Borrower Request – a system that, since the Phase 1 launch of TrueFi, has already cleared borrowers like Alameda Research, Wintermute Trading and Invictus Capital. New borrowers can initially access smaller loans, averaging between $1 to 2 million; as they develop their reputation and make their loan repayments on time, they can access larger loan amounts, upwards of $10m.

TrueFi is preparing to launch the next phase of its platform, with milestones through to August 18th of this year, through a roadmap that sees the platform becoming more lucrative and streamlined to use for borrowers, lenders and stakers alike. TrueFi will release the next generation of its platform across four phases, with Phase 1 already delivered and usable at

The roadmap initially started in November 2020 with the Version 1 (V1) network launch, allowing pre-vetted companies to begin the onboarding process to request capital. Institutional borrowers had to complete a KYC/AML review and sign their loan agreements before they could start taking out their first loans. Having an MVP is an essential first step, but TrueFi’s roadmap highlights just how much further they are planning to go.

Establishing Dominance with Network Upgrades

Initially only available through interacting with TRU and TUSD, TrueFi plans to become an on-chain lending platform that integrates with a variety of protocols and cryptocurrencies. This process will not happen overnight, which is why TrueFi’s in-depth roadmap helps paint a picture of exactly how they will make this goal a reality. Currently in Phase 2, with an expected ship date of February 19, TrueFi is adding a Liquid Exit, an improved user staking model, and full on-chain governance. These upgrades will incentivize platform use, making it easier for users to interact with, govern, and capture returns from the platform.

In Phase 3, TrueFi will continue to expand on its platform interoperability, introducing new USD-backed stablecoins, adding lines of credit, creating a more robust credit model for onboarding new borrows, and allowing all loan and line of credit tokens to be individually tradable. Focusing specifically on USDC, the largest fully collateralized dollar-backed stablecoin on the crypto market, TrueFi wants to expand its operations, leading to more widespread adoption by the DeFi community. Another critical attribute, the introduction of credit lines, will allow borrowers to open long-term loans, a highly requested feature from current borrowers and a world-first for DeFi.

The Endgame for Uncollateralized Lending

The final phase of the TrueFi launch should initiate the beginning of a highly functional, cross-chain uncollateralized lending platform, equally able to serve institutions, retain users, and lend to other protocols. With the plan to add support for a wide variety of ERC20 tokens, increase lending pool options, and allow other protocols to partake in loan token and line of credit options for primary fundraising, TrueFi could very well establish itself as the market leader for uncollateralized loans.

TrueFi doesn’t plan to stop developing when Phase 4 is complete, and already has other considerations it is working on. Until Ethereum 2.0 introduces full PoS, allowing for high transaction throughput, TrueFi is looking into layer-two scaling options. They also have protocol-to-protocol lending on their agenda, but have more important features to implement first. All told, 2021 looks set to be an exciting year for TrueFi and a new chapter for DeFi lending.

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