*obligatory not financial advice*
What is TrueFi?
TrueFi is a protocol on the Ethereum blockchain that aims to provide loans without any collateral. DeFi loans are not a new thing, but all available options require a collateral, you usually need to have at least 120% of what you want to borrow. Such collateralized loans only work for people that have enough assets that they just don't want to sell because they are bullish on them, or for people that want to short a borrowed asset. TrueFi wants to offer loans to people without a collateral by using things like on-chain credit scores.
TrueFi was built by TrustToken, who are also the issuers of a centralized stablecoin called TUSD, with the vision of bringing the $11 trillion global industry of traditional uncollateralized lending to the crypto economy because it possibly offers opportunities for lenders to earn a higher yield than secured lending and lets borrowers maximize their efficiently.
The protocol is actually very centralized because TrustToken needs to whitelist borrowers before they can take a loan and they only whitelist larger institutions, but the goal is to slowly progress to decentralization were TRU holders will be able to vote on who can get a loan and who not. Eventually, the platform will take both on-chain and off-chain data like a borrower’s corporate background, repayment history, operating and trading history, assets under management, and other metrics to build an on-chain credit score that the TRU holders can see. TrueFi will likely become a hybrid of both traditional finance and decentralized finance, because borrowing requires KYC and someone to verify it but lending and governing the protocol is done in a decentralized manner.
Lenders can deposit 4 different stablecoins that can be borrowed by credited users, those being TUSD, USDT, USDC and BUSD. Lending gives you a decent APY of about 5%, about 9% if we count the extra TRU token rewards too. Funds that are not borrowed right now are automatically deposited into other large DeFi protocols like Curve Finance, that’s why you also earn additional CRV tokens by depositing funds.
There are pretty good rewards you can earn by using TrueFi and the idea of uniting traditional finance with DeFi has a lot of potential, but keep in mind that the protocol is only partly decentralized.
The TRU Token
TRU is the governance token of the TrueFi protocol. They can vote on possible updates to the protocol and in the future they will be able to stake on loans they approve off to earn a yield. 10% of staked TRU can be used to cover for debts that default and cannot be paid back, which means that TRU stakers have an incentive to be careful with which loans they approve.
There is a max supply of 1,440,000,000 billion and only about 700,000,000 are in circulation right now. Of the total supply, 34,25% went to the developers and the foundation behind them, 26,75% were sold to investors and 39% are used for incentives and rewards for protocol users.
The 39% that are used for rewards can be earned by supplying stablecoins to the protocol, but you can also stake Sushi liquidity pool tokens for the ETH/TRU pair to earn TRU rewards.
It’s worth mentioning that the tokens of the investors and developers have a vesting schedule and will be partly released on the following dates, and there will likely be sell off and the price will probably dip:
- November 21, 2020 [COMPLETED]
- February 19, 2021 [COMPLETED]
- May 20, 2021 [COMPLETED]
- August 18, 2021
- November 16, 2021
- February 14, 2022
- May 15, 2022
- August 13, 2022
The value of the token depends on how much money is in the TrueFi smart contracts. You can deposit stablecoins for a solid yield in stablecoins, TRU tokens and also CRV tokens. Uniting traditional finance with the world of DeFi also has a lot of potential and TrueFi could become a huge deal with its approach, but keep in mind that it’s still a rather centralized project and I can't imagine that it will ever become completely decentralized. It has a small market cap and has plenty of room to grow but is also rather risky because of that.
If you want to use TrueFi you can do that with the MetaMask wallet and you want to buy TRU you can do that on Uniswap, Sushiswap and centralized exchanges like Binance and MEXC.
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