TrueFi

About TrueFi

TrueFi is a decentralized finance (DeFi) lending protocol built on the TrustToken platform. It allows users to obtain uncollateralized loans funded by the TrueFi fund. The protocol aims to assess borrowers’ creditworthiness based on their on-chain behavior instead of traditional credit scores.

History of TrueFi

TrueFi was launched in November 2020 by TrustToken, the company behind popular stablecoins like TUSD. It was envisioned as a way to expand access to credit globally using cryptocurrency and decentralized technologies. The protocol was built on top of the Ethereum blockchain.

In 2021, TrueFi introduced staking and governance features through its native TRU token. This allowed TRU holders to earn rewards and have a say in protocol changes. The team also partnered with major DeFi projects like Aave to boost TrueFi’s lending capacity.

How TrueFi Works

The TrueFi protocol has two main participants – borrowers and lenders. Borrowers can apply for uncollateralized loans by staking TRU tokens and having a strong repayment history. The TrueFi fund, managed by the protocol, provides the loan capital.

An AI-based credit model and human committee assess borrowers based on various on-chain and off-chain factors. Approved loans must be paid back in the allotted time to maintain a good credit score. Lenders earn fixed interest rates on the loans they fund.

The TRU token plays a key role in aligning incentives and providing governance rights. Staking TRU also allows token holders to earn staking rewards.

TrueFi Lending Protocol

The TrueFi lending protocol is designed to offer uncollateralized loans to borrowers based on their creditworthiness. Here are some key aspects:

• Borrowers stake TRU tokens to apply for loans. More TRU staked leads to higher loan eligibility.
• Loans are funded from the TrueFi fund which starts at $20 million. The fund is managed using TRU token governance.
• An AI model analyzes on-chain and off-chain borrower reputation to generate a TrueFi credit score.
• A human committee reviews edge cases before approving loans. Loan terms can range from 1-12 months.
• Approved borrowers receive their loaned assets and must pay back on time. Repaid loans earn interest which goes back to the fund.
• Defaulted loans are covered by the fund. Borrowers with defaults are barred from taking new loans.

TRU Token and Governance

The TRU token is the governance and utility token of the TrueFi protocol. Here are some key functions:

• TRU holders can stake tokens to earn staking rewards and borrower fees.
• Staked TRU also boosts borrowing power and loan eligibility on the protocol.
• TRU holders vote on protocol changes, fund management, and other governance decisions.
• 1% of loan repayments are burned to reduce token supply. New TRU is minted weekly and distributed as staking rewards.
• TRU will transition to fee-on-transfer tokenomics in the future. Fees will fund protocol development.

Overall, the TRU token aligns incentives between borrowers, creditors, and token holders on TrueFi.

Advantages of TrueFi

TrueFi brings some unique advantages to decentralized finance:

• It expands access to credit globally using cryptocurrency and blockchain technology. No traditional credit checks.
• The proprietary AI credit model and human review process reduce defaults through careful vetting.
• Loans are uncollateralized, allowing borrowers to retain ownership of their assets.
• Interest rates are competitively set to provide value to borrowers and lenders.
• The TRU token aligns incentives via staking, governance, and fee structures.
• Backing by TrustToken provides legitimacy, partnerships, and integration with real-world credit data.

Disadvantages and Risks

However, TrueFi also comes with some drawbacks:

• Uncollateralized loans carry a higher risk of default than collateralized ones. The fund could suffer losses.
• As an early stage protocol, liquidity for loans may remain limited for some time.
• There is a risk of TRU tokens losing value if the protocol fails to attract users long-term.
• The credit model is largely unproven and may approve loans too liberally or strictly at first.
• Regulation around uncollateralized crypto lending is currently unclear.
• Users must trust TrueFi governance not to act maliciously with the protocol and funds.

Future Roadmap and Developments

TrueFi aims to build out more features and mainstream adoption going forward:

• Transition TRU to a fee-on-transfer token model to better fund development.
• Launch mobile apps to provide a smoother borrowing and lending experience.
• Offer portfolio margining for borrowers using their TrueFi credit score to get lower rates.
• Partner with credit bureaus, identity platforms, and offline retailers to augment credit and reputation data.
• Expand the fund’s capacity to $1 billion through partnerships and community initiatives.
• Enable NFTs as collateral for loans, allowing NFT owners to retain assets.
• Pursue licenses to offer regulated uncollateralized loans in key global markets.

Conclusion

TrueFi brings a novel approach to decentralized finance through uncollateralized lending based on reputation. With its credit model, funding capacity, and strong team, it has the potential to emerge as a mainstream DeFi lending protocol. However, prudent protocol governance and risk management will be critical in achieving long-term sustainability. The road ahead remains challenging but exciting for this pioneering DeFi project.