Welcome to Amberdata's Podcast series featuring leaders in the Crypto space where we go in-depth and dive into various topics.
In this episode, Chris Martin, Amberdata's Principal Analytics Engineer, interviews Blake West, CTO & Co-Founder of Warbler Labs and Co-Founder of Goldfinch.
Warbler Labs is building the tools and technology for crypto to reshape the global economy and expand access to capital worldwide and is behind the core development team supporting the growth and success of the Goldfinch protocol.
Goldfinch's mission is to expand access to capital by creating a single global debt market through a decentralized credit protocol on Ethereum. Goldfinch enables everyone from the smallest businesses in Nigeria to the largest institutions can borrow from the same capital markets.
Previously, Blake was a Senior Backend Engineer at Coinbase. Listen along as Blake discusses Goldfinch's governance tokens, Unique IDs (UIDs), and the current and future states of DeFi.
To view our previous episodes, visit Amberdata's YouTube channel!
Amberdata Podcast host Chris Martin welcomed Blake West, CTO and co-founder of Warbler Labs and Goldfinch, to the podcast. They had an interesting conversation about Goldfinch's governance token, unique ID (UID), similar to decentralized IDs or DIDs, the current state of DeFi, and the future state of DeFi.
Goldfinch is a decentralized credit lending protocol on Ethereum that focuses on real-world borrowers, unlike other crypto lending platforms such as Celsius and Maple, which focus on crypto borrowers. Goldfinch tries to be uncorrelated from the rest of the crypto markets, and it has over 100 million dollars of loans active right now from borrowers in over 20 different countries.
Blake West and his co-founder Mike were at Coinbase in late 2019 when they saw the success of DeFi, including Compound and Aave. They were thinking seriously about whether they could do something in DeFi and joined the HTC Crypto Startup School program in early 2020 to discuss ideas. They found that the total niche of asset-backed over-collateralized lending was pioneering, but they thought they could do that for regular lending, which is what 99.9% of lending is all about.
Goldfinch Protocol uses real-world assets as collateral for lending, and borrowers are fintech companies from all over the world. For example, one of the first loans they did was to a company called Pedroy, which provides smartphone financing in Mexico. The company puts special software on the phone, and if the borrower doesn't pay, they shut it off remotely. Goldfinch is primarily lending to lenders who lend to their local markets, and they have the licenses and expertise within their local markets to lend money to individuals or businesses.
Goldfinch is a protocol and platform that allows investors who have USDC to put it into smart contracts for borrowers who are vetted by investors. Because they are high-quality companies with a reputation and track record, investors have more confidence in lending. Moreover, there are legal agreements signed between the company and the investors directly, so there's no middleman involved.
Warbler Labs is a company that supports The Goldfinch Protocol, similar to how other things in crypto work, such as the Engine Node to the Graph Foundation and the Ethereum Foundation to Ethereum.
Goldfinch is not like Lending Club, as the borrowers are companies rather than individuals. The lending is related to businesses that need money to grow, and it primarily fills the financing gap in emerging markets on quality businesses that can take money and use it productively. Goldfinch helps to connect capital on-chain that was looking for uncorrelated yields, and it provides a direct relationship between investors and borrowers.
One advantage of Goldfinch's approach is that it allows borrowers to receive loans without having to put up collateral. Instead, lenders use a "credit model" that assesses a borrower's creditworthiness based on factors such as their employment history and cash flow. This approach allows borrowers to receive loans without having to risk losing their assets if they default on the loan.
Goldfinch's platform also allows lenders to use technology to gain an edge in the lending process. For example, Goldfinch partners with Tugende, a company in Kenya that leases out motorcycles to individuals who use them for gig economy delivery work. The motorcycles serve as collateral for the loan, and they have a GPS tracker that allows lenders to repossess them if the borrower fails to make payments.
Another advantage of Goldfinch's platform is that it uses stablecoins, such as USD Coin (USDC), as a means of exchange. This reduces the costs and hedging that borrowers in emerging markets often face when dealing with traditional banks. Goldfinch chose USDC because it is one of the most trusted stablecoins available, and it is backed by U.S. laws and banking systems.
Goldfinch's governance token, GFI, is also unique in the DeFi space. Unlike other DeFi governance tokens, which are used to incentivize borrowers or lenders, GFI acts as a "flywheel" that signals consensus and direction in the protocol. GFI holders have governance rights and can vote on proposals, but they are primarily incentivized to hold the token as a way of accessing yield enhancements on their investments.
Goldfinch's commitment to transparency is clear in its Dune Analytics dashboard, which provides real-time data on the protocol's performance. The dashboard is open to anyone and allows users to see how much money has been lent out, how much interest has been earned, and how many borrowers and lenders are using the platform.
Overall, Goldfinch's approach to DeFi lending is unique and provides much-needed financial services to underbanked individuals and small businesses in emerging markets. By partnering with local lenders and using technology to gain an edge in the lending process, Goldfinch is making it possible for more people to access loans without having to put up collateral or deal with the high costs of traditional banking.
Goldfinch is pushing towards creating more liquid structures in the DeFi space by introducing new products and solutions such as callable loans and decentralized identity systems like UID (Unique Identity), the company's use of Soul-bound NFTs for identity verification purposes.
Goldfinch's UID is a decentralized identity solution that uses Soul-bound NFTs to represent that a borrower has undergone Know Your Customer (KYC) checks. This is necessary as lending to businesses in the DeFi space requires meeting KYC and Anti-Money Laundering (AML) requirements. The solution enforces KYC compliance at the smart contract level and makes sure that every investor possesses a UID.
While there were some off-chain solutions initially, the company wanted something on-chain that could be decentralized and used by other protocols. Thus, they created UID, and since then, other protocols have organically started to use it because it's free and open to use. The system allows protocols to identify and verify the identities of their users while improving product experience, enabling new product features, and making customer support easier.
Regarding the future of DeFi lending, West predicts that it will be a mix of both real-world and digital assets. He emphasizes that most of the economy is not related to crypto, and those areas need lending, which naturally means more real-world use cases. However, with on-chain flows already in place, lending for digital assets like digital art can be more powerful on-chain.
West also discussed Goldfinch's newest offering, callable loans, which the community recently voted for. The new structure is designed to improve liquidity and allows investors to earn yield consistently while retaining the option to call back their capital sooner than the traditional two or three-year loan period. The system is operationally more manageable for borrowers, with the smart contract handling all the calculations and payouts for any number of investors worldwide.
When asked about the potential use cases for Goldfinch and Warbler Labs, West expressed excitement for the possibilities, saying, "there's going to be a lot of interesting use cases that you didn't think of." Goldfinch and Warbler Labs are focused on democratizing access to credit for borrowers who do not have access to traditional lending systems. West believes that this type of financial inclusion is a key part of the future of DeFi.
West also discussed the importance of user experience in the crypto industry. He noted that the industry has been "pretty bad" about UX, and that the bear market has been a good reminder to focus on the fundamentals of running a business. Specifically, West believes that the crypto community needs to build experiences and products that are better for normal people to use than what is currently available in Web 2.0.
West also talked about the potential for layer 2 solutions and the recent account abstraction upgrade to improve UX in the crypto space. He emphasized that it is up to developers and builders to take advantage of these tools to create great experiences for users.
The interview lastly touched on the importance of safety in the crypto space. West noted that it is too easy for people to lose money due to poor UX, and that this can turn people off from using crypto altogether. He believes that the industry needs to prioritize user safety and make it easier for people to avoid phishing scams and other forms of fraud.
As the industry continues to grow and evolve, it will be important for developers and builders to focus on these core principles to ensure that crypto can achieve its full potential.