TrustToken, the core development team behind the TrueFi collateral-free lending platform and maker of asset-backed tokens including TrueUSD, is launching the first crypto credit scores to power reputation-based lending on the TrueFi platform. The decentralized protocol is also adding USDC and USDT support.
While traditional finance uses a number of factors to assess borrower creditworthiness – including the borrower’s total available capital, the utilization of these funds and the company’s repayment history – today’s DeFi projects are limited in their ability to nuance loans based on credit scoring. To unlock the next era of lending and borrowing, DeFi must combine on-chain and off-chain data to build crypto-native credit scores, which will create sophisticated models of creditworthiness usable across a range of protocols, and bring the trillion-dollar industry of unsecured, reputation-based lending to the blockchain. TrueFi’s new credit model represents the first major step towards crypto-native credit models, having successfully originated over $100m in unsecured loans with no defaults.
TrueFi’s May 20th version three launch enhances the existing method of assessing borrower creditworthiness with an increasingly sophisticated due diligence process, replacing the usual DeFi requirement for posted collateral. TrueFi requires incoming borrowers to report details about company background, repayment history, operating and trading history, assets under management, and credit metrics like leverage and risk exposure. These combined materials, along with other on-chain and off-chain data, generate a score (on a range of 0-255) for the applicant, which informs TrueFi loan terms. In future, TrueFi will also roll out lines of credit for its borrowers, which will essentially act as open-term loans to make loan processing even more seamless for approved borrowers, and move towards making TrueFi credit scores usable across other protocols for various financial activities.
TrueFi is simultaneously expanding lending opportunities by adding USD Coin (USDC) to their list of tokens, soon to be joined by Tether (USDT). With a market cap nearing $5 billion, the addition of USDC opens up the TrueFi pool to a larger set of depositors and offers USDC users one of the most competitive earning opportunities on their stablecoin available – with no risk of impermanent loss common in many other yield farms. Hundreds of businesses already support the USDC token, including digital wallets, exchanges, DeFi protocols, savings, lending and payment services – and the asset remains a favorite among lenders and borrowers.
“It’s an incredible milestone for us to be launching a credit model to serve not just TrueFi, but eventually all of DeFi activity,” said Rafael Cosman, cofounder of TrustToken. “The credit model is the first-of-its-kind, and down the line it will become an integral building block for assessing creditworthiness in DeFi.”