Hello! BlockTalkers & Blockchain Enthusiastic!
We recently hosted an AMA with TrueFi, on April 27th at 1.00 PM UTC. Many of you might have participated or many of not. But we make sure no one missed out from the knowledge shared by Michael Gasiorek, Head of Marketing of TrueFi. So here we are up with the AMA transcript, for those who missed the live session, this blog post will be a saver & feeder of knowledge for them.
Introduction Questions Asked By Team BlockTalks!
Q1. Could you please introduce TrueFi to our community in layman’s term?
Ans — Michael runs all things marketing & comms at TrustToken, makers of TUSD and TrueFi. He’s also the CEO of marketing agency Truth Cartel, owner and editor of Medium’s largest blockchain publication The Crypto, and a host of regular community events in the Bay Area and beyond. Prior to joining TrustToken, Michael was Editor in Chief at Startup Grind and a regular contributor to Inc and Fortune.
TrueFi is a DeFi credit protocol that powers uncollateralized loans. TrueFi’s is the first and largest protocol for fixed-term, zero collateral loans, made possible through a combination of the best of centralized and decentralized finance.
If you want to check it out more after, our website is here: https://truefi.io
And our litepaper is here: https://bit.ly/truefiblog
It takes three players to make TrueFi work:
Vetted Borrowers like Alameda Research, Wintermute Capital, and Poloniex. Borrowers request capital and offer Lenders interest on the loan. Only institutional lenders are able to borrow right now, but TrueFi is exploring retail & protocol-to-protocol loans in the future. All Borrowers complete a background check (KYB), make their requests for capital publicly (no anonymous borrowers yet), and sign a legally enforceable lending agreement in case of default.
Stakers of TRU, the native TrueFi currency, review these Borrowers and approve each individual loan for creditworthiness, assisting in vetting the risks taken on by TrueFi. TRU holders also participate in governance and guide the direction of the overall TrueFI platform.
Lenders (like you and me) deposit cryptocurrencies into TrueFi to earn a competitive yield. These deposits are used to fund loans to Borrowers. Currently only TUSD is supported, but more tokens will be supported in the future (including USDC and USDT, and likely BTC, ETH, and more). Unlike centralized lending projects, TrueFi Lenders have full transparency of how lending pool funds are allocated, making risks transparent.
The overall goal is to make TrueFi the ultimate credit protocol in DeFi, with the ability to move money wherever it creates the most value - instantly.
For a simple walkthrough, we also made a video of the process: https://www.youtube.com/watch?v=i8NoS5zRj9Q
Q2. What are the advantages of TrueFi to other alternatives in the Blockchain field?
Ans — So, today, lending and borrowing on the blockchain requires COLLATERAL: if you want to get DAI from Maker, you have to lock up ETH, at +150% ratio. That’s an amazing innovation, but it also means you can put your ETH to work!
A big reason for that is because on-chain lending doesn’t support reputational-based loans - like you get from your credit card company, for example.
TrueFi offers uses reputation-based credit scores to make no-collateral loans.
We’re the FIRST protocol to do it, and we’ve already completed +$100m in loans since November 2020.
On top of this technical & financial innovation, we also have 3 big advantages:
1. Versus centralized lenders (Celsius, BlockFi, Nexo): We’re extremely transparent. You can see exactly how your yield is generated - who’s using your money, etc.
2. Versus collateralized lending, we offer much higher earning rates: right now you can earn +50% for your TUSD deposit, and soon we will also support USDC, USDT, DAI and others. You’ll earn more with us
3. We’re owned and governed by our users, TRU holders. We’re a fully decentralized platform, with TRU stakers and voters really guiding the direction of our product. If you get involved, YOU can tell us what you want to see next!
Q3. What are the major milestones TrueFi achieved so far & what are in the future pipeline?
Ans — TrueFi launched in late November 2020. In the last 4 months, TrueFi has hit $100m in loans originated to big borrowers: SBF’s Alameda Research, Wintermute Trading, Invictus Capital, Poloniex, and others. More borrowers are coming each week, and they’re TRULY the best crypto companies in the industry.
You can see all active loans here: https://app.truefi.io/loans
We landed in the top 30 DeFi projects by DeFi Pulse, and top 10 lending protocol, with TVL of over $80 million right now.
We’ve also launched governance as part of TrueFi V2, grew our communities into the thousands, burned over 7m TRU, and grew the team a lot.
We’re still hiring - join us at https://www.trusttoken.com/about
We’ve also kicked off a ton of partnerships and integrations, many with projects you’ll recognize: Alameda, FTX, Binance, Chainlink, Armanino LLP, Sushiswap and many others.
Finally, TRU is trading on many of the world’s best centralized and decentralized exchanges, including Binance, FTX, Poloniex, Gate io, MXC, Uniswap and Sushiswap. It’s *everywhere*!
Now, what’s coming next:
We’re moving through a medium-term roadmap to fully realize the potential of TrueFi, after which our community will direct more and more of development.
The two biggest things I’m excied about:
1. Adding new tokens to the lending pools (USDC, DAI, USDT, BTC, ETH): this will let more people use Truefi, and should also drive up TVL (often correlated to token price for lending platforms) a lot 🙂
2. Launching credit model: this will make us the first protocol with an on-chain credit model, which we hope will become an important building block of DeFi going forward, letting borrowers get better rates in crypto based on their lending history. It is going to be a historic development!
All this is in our roadmap blog post here: https://blog.trusttoken.com/the-truefi-protocol-roadmap-92f388ac6eb3
Questions Asked on Twitter For TrueFi Team!
Q1. I have understood that TrueFi was designed to work on Ethereum Network, but have you considered integrate or support more chains to prevent the huge transactions fees? Like BSC, HECO, etc?
Ans — We’re right now built on Ethereum, because that’s where ALL of DeFi really lives (especially the projects we’re partnering with), and we’re very excited about scaling solutions coming out on ETH like Optimism, which should dramatically reduce gas fees.
We’re also collaborating with other protocols, namely Binance Smart Chain, Avalanche, Polkadot, and some others, to explore bridging TrueFi there.
We probably won’t do any chain migrations until we finish our roadmap, though!
If you feel strongly about it, though, you should ask about it in our Discord or forum (https://forum.truefi.io) - it’s the community’s decision!
Q2. I imagine your platform watches daily in the front row as DeFi yields constantly rise and fall, how does TrueFi support TUSD stablecoin miners and how they approach leverage at the trading desks?
Ans — So, few clarifications:
1. TUSD is not mined - it’s a stablecoin minted in exchange for USD. It’s 100% backed by dollars, so no way to mine it 😛
2. Not sure how folks are using TUSD or TRU in leveraged positions at trading desks, but I CAN comment on DeFi yields
To clarify, here’s all the tokens we use on TrueFi, so we don’t get confused:
Now, in terms of DeFi yields: I’m a bit of a DeFi degen, myself, so I’m DEEP in this world - and I love some of the crazy yields, it’s fun to play across these projecst and earn, like, 500% APY
But of course, we think that’s pretty unsustainable. There’s a limit to how many tokens people can launch that traderse will actually be excited about. And in the end, we think the DeFi yield rates will fall - a LOT.
You know what we think won’t fall that much? Lending rates.
But ESPECIALLY lending rates for unsecured loans (loans requiring no collateral)
That demand is pretty high, and the rates are high, too.
So we think TrueFi will, in the long term, offer some of the best earning rates available in DeFi - because of the TYPES of loans it provides.
And because that type of earning opportunity is long-term high demand
Q3. In the crypto field, it's very hard for projects to generate revenue/profits, some projects have a 10% dev share(10% from transaction fees taken by the project), can you explain to us in what way that TrueFi creates revenue/profits?
Ans — Let’s explain our business:
1. TrustToken is the parent company: it built and operates stablecoins (TUSD, THKD, TCAD, TAUD, TGBP) and synthetic assets (TFX, TGOLD). It also provides some compliance/operations services to big partners.
2. TrueFi is a decentralized protocol. It doesn’t make money for TrustToken - it sends all that revenue to TRU holders, lenders, and stakers. It DOES, however, aim to grow the value and utility of TRU.
TrustToken makes a fair amount of money doing its work every year, and is also a big holder of TRU. It makes enough money to keep paying everyone working on TrueFi a very nice salary until 2026 or so (right now). TrustToken supports TrueFi development because, as TrueFi becomes great, TRU grows in value, and appreciates in the TrustToken treasury. It’s like an investment
tldr = TrustToken has enough money to keep building TrueFi for a long time. We do it because we want to build a great project AND because if it’s a great project, it’ll make TRU more valuable. TrueFi sends all revenue back to its users.
Q4. In an Medium article says that TrueFi was made to "MARRIAGE " Centralized and Decentralized Finance, so can you explain us how exactly are you able to do that?
Ans — TrustToken started in 2016, launching a bunch of really popular stablecoins (like TUSD, which you may know)
We had to build a very strong, very transparent, regulated & compliant business - we have full time compliance officers, lawyers, credit analysts, etc - just like any other regulated financial business.
We had a front row seat to DeFi: stablecoins are KEY to DeFi adoption, so we saw the entire industry emerge from nothing.
We thought about entering DeFi, but were thinking - with what? What could be a good use of the skills and talent we already have?
It was obvious that some type of project that would NEED a strong compliance/credit/regulatory arm + merged with decentralized, open, on-chain protcol would be the best fit for us
Reputation-based, unsecured lending was the biggest ideas around - no one had solved it, it would NEED to be solved, and we were in the BEST position to try it.
How does it work?
TrueFi is decentralized and run by TRU holders - it’s a standard DeFi project, in that regard, at the highest levels of decentralization.
TrustToken Inc is still a major player in the TrueFi ecosystem. Not just our devs but also our lawyers and compliance people KYC every single borrower on the platform, our lawyers make them sign binding loan agreements so we can collect the $$$ in case of default, and our credit analysts set the rates and terms on which the borrowers use the platform.
Without them, TrueFi would be IMPOSSIBLE. Or it would be illegal
BUT here’s the interesting part:
TrustToken is just one provider of compliance/legal/credit services to TrueFi
In the future, other companies can take TrustToken Inc’s role - by offering better/faster/cheaper KYC, by doing more robust credit scoring, etc.
So basically, TrustToken is very involved in TrueFi right now - but the protocol is designed so that we can be replaced.
Think of TrustToken as TrueFi’s dad: important for it to grow up, but soon, TrueFi will be able to run off on its own - and make other friends that will help it behave well in the big world.
Q5. If TrueFi's unsecured loans really have more risks and require more commissions than guaranteed loans, then why should users migrate from secured loans to this TrueFi platform? Is it worth taking those risks of losing capital?
Ans — Well, depends: if you can stomach more risk, you’ll also have better returns.
I can’t tell you how to invest, but I can tell you this:
1. Unsecured loans get better returns than secured loans, because they allow the borrower to keep more capital at work. That means they command a higher premium. That means you earn more on your money.
2. The borrowers go through an EXHAUSTIVE review of their background, use of funds, community vote and more to become approved. There is risk, of course, but the review tries to eliminate borrower risk as much as possible.
3. You receive some pretty good protection in using TrueFi: staked TRU protects part of your investment, and a SAFU fund is being designed to protect even more. At the same time, the project has been audited 3 times, and is also insured against hacking by Nexus Mutual
So, tldr: why switch to TrueFI?
1. Better rates of return
2. Borrower risk is rigorously examined
3. Additional support against loss of funds due to hack or default
Also, we’ve never had a default, after +$100m in loans
So you could say it’s working so far.
Questions Asked by our BlockTalks Community Members during live Session to TrueFi Team!!
Q1. There are some risks in the crypto world that we have to face. But what are the main risks do users o TrueFi face for making uncollateralized lending? How trust is this for the borrower and the lender?
Ans — It’s a great question, basically boils down to two major risks: risk of platform hack, and risk of loan default
We’ve undergone 3 audits + have really strong engineering, but hacks are always a risk. If you’re worried about it, you should take our a Nexus Mutual insurance!
Loss of funds is the more likely one, but I’ve explained some of the precautions in the blog post below, and it has never happened so far!
Q2. On TrueFi’s Roadmap’s Phase 3 scheduled for May 20th 2021, there’ll be lots of new things coming, but the one that caught my eye was the Launch of Lines-of-Credit, could you please tell me what good is this feature going to do towards the platform and boost its growth? How many Lines of Credit do you think will be implemented? What is your goal in accomplishing this matter?
Ans — Right now, loans are 1-by-1: borrower requests money, uses it for 30-90 days, pays it back with interest.
Lines of credit = borrower has a certain credit limit, and can use the money indefinitely, so long as they continue paying the interest. If there’s any reason to get their credit line decreased, borrower will have a short time to repay their outstanding debt.
Borrowers REALLY want lines of credit (just like credit cards for you and me, but MUCH bigger amounts), and it’s GREAT for lenders because it means predictable high returns from trusted parties with LESS involvement on the platform.
We think MANY borrowers (20-40 now in our system) will want this new model of loan.
Q3. How does TRU play a role in TrueFi’s ecosystem? How to make profit from TRU?
Ans — First I’ll share a quick intro on it and then give more detail:
TRU is used for staking (to approve loans + assure lenders) + governance + trading liquidity
You can make ROI on it largely by staking (~55% APY) on TrueFi.io or by providing liquidity on a DEX like Sushiswap (30-100% APY with some risk of impermanent loss).
First I’ll share a quick intro on it and then give more detail:
TRU is used for staking (to approve loans + assure lenders) + governance + trading liquidity
Q4. Can you explain the overall tokenomics and liquidity locks about $TRU and TrueFi?
Most of the TRU is allocated to incentives, and all of the private sale/team allocations are LOCKED (unlock over next 2 years).
And then, how is it unlocked:
Slowly, over time, and largely to USERS of the platform.
Read more here: https://blog.trusttoken.com/truefis-tru-token-economics-7facea6651c0
Q5. I found it very interesting that even though the lending is uncollateralized, the defaulting borrowers will face legal actions according to the signed loan contract. Could you detail specifically what legal actions you could take? Could they go to jail?
Basically, when the borrower signs on for a loan, they sign a lending agreement with TrustToken Inc (in the future: TrueFi foundation in Zurich). If they default, they’re taken to court over the broken repayment, under the jurisdiction of California courts
Could they go to jail? Maybe. But more likely, their assets would be seized to repay. It would be VERY public, especially for such a respected borrower, to default on a loan with us and be taken to court, and it would badly damage their credit score across DeFi
Suffice it to say, no borrower has had to be taken to court yet but of course, we HAVE to plan that it’s inevitable, so we have a strong plan, all described here: