TrueFi, an uncollateralized loan platform, raised $12.5 million from three big investors in August. The token sale was led by Blocktower, a crypto investment firm based in New York. Other key investors included Alameda Research and A16z.
TrueFi raised $12.5 million dollars in August. This new funding will support two main functions. It will help the company expand its operations and expand its lending products. How was this money raised? This investment was possible through the sale of the company’s native token truefi (TRU). This token will be liberated over the course of a few stages. Blocktower, a cryptocurrency blockchain VC firm, led the sale. Alameda and A16z, some of the biggest crypto investment firms, also supported the token sale.
TrueFi has moved toward a new model that will allow users to take out uncollateralized loans. This feature will be available based on certain variables. These variables will decide each user on the blockchain’s credit score.
The inspiration for this new protocol came from a system that applies traditional finance conditions to DeFi. Most DeFi loans need collateral to be issued. But traditional finance does not work this way. Instead, banks use a measure called a credit score to issue a loan. This score is based on information about the customer like their activity and volumes moved.
As a result of this new model, the company has generated more than $200 million in loan originations for Trusttoken. Trusttoken is the issuer of trueusd, a growing stablecoin. It is also the company behind the protocol.
This latest fundraising will give TrueFi the opportunity to grow its protocol’s reach and offer new products to the market. CEO of Trusttoken Rafael Cosman said this about this new development:
“This fundraise will allow TrueFi to scale through robust hiring. And strategic investments of our own. Allowing DeFi to offer more diversified yields for lenders. And even better capital access for credit-worthy borrowers.”
Alameda Research is one institution that got in on the ground floor and was able to be among the first to use the new protocol. The firm is now pushing customers to try it out. CEO of the firm, San Bankman-Fried said:
“Alameda is proud to now become investors in the team and technology behind it. We see TrueFi unsecured loans growing far beyond crypto, and we plan to be partners and users at every stage of the protocol’s growth.”
Founded in 2019, TrueFi is a protocol that offers liquidity providers a chance to create interest-bearing pools with a high APR. Its services also include reward mechanisms for participants that maintain high APRs. These rewards come in the form of TrustTokens, or TRU.
TrustToken holders are able to have a say in who is and is not a credible borrower in the prediction market. TRU is the native token of the protocol. It is used for TrustToken.
Other TrueFi platform tokens include:
TrueFi's priority is to combine uncollateralized lending and DeFi. The idea of progressive decentralization. Serves as the foundation of the company’s mission. In a way, it combines both decentralized and decentralized finance. What makes the company unique. Is that Truefi is one of the few uncollateralized defi-based lending protocols. In the industry today.
In doing so, TrueFi does two main things:
TrueFi's lending and borrowing are all transparent. The benefit of this is that users can understand the flow of funds when they do business with TrueFi. Lenders can understand who borrowers are, and activity is clear for all to see.
TrueFi loans are made to borrowers like OTC desks, exchanges, or protocols. Some of the institutional-grade borrowers include Nibbio, Amber Group, Alameda Research, and Wintermute Trading. Borrowers submit proposals to use TrueUSD capital from a pool managed by lenders. After those loans are approved by TRUE stakers, users can get fast crypto loans. For users, the best part is there is no collateral required to access these loans. If the borrower fails to return the principal and interest by the term, they will face legal action.
TRU holders are able to have a large amount of influence on the platform. They help decide borrowers who can join the platform, loan terms, and the protocol’s direction. Holders make these decisions in exchange for rewards. These rewards include the TRU token and a cut of the profits from the platform.
TrueFi relies on bootstrapped protocol that metes out TRU to users and developers who are part of the protocol. It also gives holders the capacity to rate a third party’s credit. With this rating, the credit system is built on incentives. TRU owners can thus have ownership in this novel credit system.
TrueFi's goal is to become an automated credit rating and lending system that responds well to the changing market. To get there, TrueFi must continue to grow beyond rigid finance constraints as it has done in the past. These constraints include the high TRU participation factor and the minimum and maximum annual percentage yield or APY.
As the company grows, users will also need to take on more responsibility, such as approving new kinds of loans and bringing in new, reliable borrowers.