DeFi

Third Goldfinch Default Shows How Risky Undercollateralized Crypto Loans Can Be – DL News

Published

9 months ago

14 May, 2024

Third Goldfinch Default Shows How Risky Undercollateralized Crypto Loans Can Be – DL News

Undercollateralized crypto lending platform Goldfinch just suffered its third default.
Those burned by this loss are calling on Goldfinch to reimburse users with funds from the protocol’s $107 million treasury.
Critics say the repeated defaults highlight the difficulty of securing loans to emerging markets.

Lenders using decentralized finance protocol Goldfinch are facing a major blow after another large borrower defaulted on its debts.

Borrower Lend East had previously taken out loans worth $10.2 million guaranteed by Goldfinch users.

In an April 1 update, Warbler Labs, the company behind the Goldfinch protocol, announcement Lend East would only be able to repay about $4.25 million of the loan and said it expected Lend East to default on the remaining $5.9 million when the loan matured on April 3.

“Warbler Labs is retaining an external advisor to explore all rights and remedies available to the community to maximize recovery,” the company said.

The situation with Lend East marks the third default user of the Goldfinch protocol to suffer since it began operating in January 2021.

Critics say the repeated defaults highlight the difficulty of underwriting loans to emerging markets and reveal serious problems with the Goldfinch Protocol model.

Goldfinch Users say that the initial credit assessment of the Lend East loan was “poorly executed” and that Goldfinch and Lend East failed to provide lenders with loan updates over the past year.

“Lower quality borrowers”

The Goldfinch protocol allows its users to take out undercollateralized loans from companies around the world, many of which operate in emerging markets.

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In traditional finance, these loans are risky and therefore generate high returns. In DeFi, where double-digit annual returns are common, Goldfinch fits in perfectly.

“Underwriting emerging market loans has always been difficult and putting them on the crypto track doesn’t change that,” said Tze Donn Ng, investment associate at Tioga Capital Partners. DL News.

Ng said weak regulations in emerging markets, generally low creditworthiness and adverse selection all contribute to these difficulties. “Only lower quality borrowers will come to you, otherwise they will borrow from banks or credit funds,” he said.

Instead of conducting credit assessments for loans itself, Goldfinch relies on a decentralized group of auditors to approve borrowers for consideration in the protocol. Those who supported the Lend East loan accused auditors of doing a poor job on the initial credit assessment of the loan.

“Goldfinch’s initial credit assessment was poorly executed – or the assessor was incorrectly selected – as we find ourselves with multiple defaults on multiple loans,” said a user posting under the name felix2545 in Goldfinch Discord – a messaging application.

DL News requested comment from Warbler Labs CEO Mike Sall and Chief Technology Officer Blake West. headed towards the West DL News to Goldfinch’s April 1 announcement and had no further comment.

“A model problem”

Goldfinch’s business model is not new.

Banks and credit funds have long lent money to emerging markets, but calculating the risks of taking out such loans is much more complex than lending in developed countries, such as the United States.

“DeFi adds efficiency to structuring, capital formation, and deployment, but none of that matters if you don’t have strong underwriting and recourse,” said Ryan Rodenbaugh , founder of cryptographic research and development company Wallfacer Labs. DL News.

Despite Goldfinch’s best efforts, relying on third parties to find borrowers and assess risks may prove simply too difficult to achieve.

“It’s a model problem,” said Ashish Anand, founder of asset tokenization platform Bru Finance. DL News. “Not just Goldfinch, but anything structured like a credit fund where they rely on third parties to do the sourcing.”

Despite the defaults, Goldfinch also facilitated 13 loans which were fully repaid. Another eight are listed on Goldfinch’s website as being “on time.”

A significant success

The latest default represents 7.7% of the amount of all active loans outstanding on Goldfinch. Those who were burned by this loss are now calling on Goldfinch to reimburse users with protocol funds. Cash flow of $107 million.

Combined with Goldfinch’s previous defaults of a $5 million loan to the Kenyan company Tugende, and 7 million dollars According to the American credit fund Stratos, the protocol’s total losses amount to almost $18 million.

In the case of Stratos, Warbler Labs took care of full risk and responsibility for recovery, and covered the losses of Goldfinch users. The DAO goldfinch also vote to allocate $1 million in USDC from its treasury to cover losses from the Tugende loan.

DL News asked Warbler Labs’ West if the company plans to cover losses related to Lend East’s loans. He did not immediately respond.

Another Goldfinch loan also looks shaky. Almavest, a company that lends money to Focused on ESG companies in India, Egypt, Indonesia, Colombia, Spain, the Philippines and other markets, is currently behind in reimbursing a $2.1 million loan.

It remains to be seen whether Goldfinch will be able to bounce back from his recent failure.

“To resolve the existing issues, they will have to go through the regulatory route and restructure the debt,” said Ng of Tioga Capital. “Even if it doesn’t solve the long-term problem of poor underwriting.”

Tim Craig is DL News’ DeFi correspondent based in Edinburgh. Contact him with advice at tim@dlnews.com.

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DeFi

If You Missed BONK and PEPE This Year, This Viral New Crypto Might Be Your Salvation

Published

6 months ago

29 July, 2024

CoinFlix Staff

If You Missed BONK and PEPE This Year, This Viral New Crypto Might Be Your Salvation

Bonk and Pepe appear set to net new investors 10x to 100x returns over the next 12 months. However, cryptocurrencies in the DeFi play-to-earn gaming sector could offer even greater returns. As August approaches, Rollblock is emerging as a standout DeFi play-to-earn gem with the potential to 100x-1000x gains in the fourth quarter and beyond.

The project features an innovative revenue sharing model and exceptional accessibility, attracting players and investors. Additionally, Rollblock’s extensive game library of over 150 titles and enhanced sports betting are further driving excitement for the platform. Cryptocurrency analysts are expecting a sudden surge in demand. 800% a push for Rollblock from the beginning of September.

Bonk remains strong despite market fluctuations

While most well-known cryptocurrencies struggled throughout July, Bonk remained strong. As one of the highest-grossing meme cryptocurrencies of 2024, Bonk rose over 24% in July, while most cryptocurrencies experienced negative fluctuations.

Investors looking to add a relatively safe memecoin to their portfolio should consider Bonk. While Bonk is unlikely to generate explosive gains of 250x to 1,000x from here on out, Bonk could still theoretically provide returns in the 20x to 100x range.

Pepe should see a big rise in the next bull run

Alongside Bonk, Pepe has yet to go through a bull run. This means that there are still substantial gains to be made from Pepe over the next 12 months.

Pepe is down 4% in 30 days, but that shouldn’t worry Pepe investors in 2024. Experts believe Pepe’s best days are still ahead, with crypto analysts predicting a 10x to 50x surge in the next election cycle around November.

In the long term, Pepe could surpass the 100x mark for today’s investors. However, Pepe is a memecoin, and one should exercise caution when investing in purely speculative assets that have no utility.

Rollblock’s Unprecedented Hype Potential Could Push It Past 100x Valuation in Q4

Rollblock is a GambleFi Play-to-Earn token that integrates centralized and decentralized gambling on a single platform. By allowing players to earn rewards through active participation and gameplay, the platform creates a compelling incentive structure that appeals to both casual and competitive players.

With its cutting-edge blockchain technology, Rollblock offers top-notch security that keeps bets and transactions on the platform secure. The platform’s lack of KYC mandates appeals to both users who value anonymity and security.

Rollblock’s revenue sharing model, which allocates up to 30% of casino revenue to RBLK token holders, is a major draw for investors. The model involves burning half of the repurchased tokens and distributing the other half to stakers, increasing the token’s value and encouraging long-term investment.

The platform is also constantly evolving thanks to user feedback which has enabled updates such as the upcoming sports betting feature within the platform’s casino. This addition will complement Rollblock’s extensive game library of over 150 titles, ranging from traditional poker to innovative blockchain-based games.

RBLK is expected to emerge as one of the leading DeFi tokens in 2024. With a price of $0.0172 with impressive growth potential and over 140 million tokens sold recently, Rollblock is on track to enter the top 100 cryptocurrencies by Q4, making today a lucrative time to buy RBLK tokens.

Discover the exciting opportunities of the Rollblock (RBLK) presale today!

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DeFi

Cryptocurrency sector is experiencing ‘most misjudged moment’ since 2020, says venture capitalist Arthur Cheong

Published

6 months ago

29 July, 2024

CoinFlix Staff

Cryptocurrency sector is experiencing ‘most misjudged moment’ since 2020, says venture capitalist Arthur Cheong

Veteran cryptocurrency investor Arthur Cheong believes the digital asset sector offers long-term holders a golden opportunity.

Cheong, the founder of DeFiance Capital, tell His 171,700 followers on social media platform X indicate that he believes decentralized finance (DeFi) is hugely undervalued.

According to Cheong, DeFi projects are innovating at a rapid pace and leaving traditional financial (TradFi) companies in the dust.

“It’s been a long time since I’ve been this excited about the risk/reward and potential upside of DeFi. This is probably the most misjudged moment since the pre-DeFi summer of 2020, with extremely promising prospects.

I see opportunities not only in OG (original) DeFi, but also in some newer projects that are evolving rapidly and growing at a pace that fintech startups will do anything to match.

The veteran investor also believes that crypto is now here to stay following recent launch from the Ethereum spot market (ETH) exchange-traded funds (ETFs) last week.

“Overall, the floodgates are open and there is no turning back. TradFi asset managers will continue to launch new crypto products because, guess what: there is huge demand for them!”

I expect them to launch actively managed crypto ETFs [in the] coming years. ”

Earlier this month, Cheong laid that it might be a bad strategy for cryptocurrencies to seek mass adoption, believing that digital assets are designed to disrupt several key financial sectors.

“I think we should accept that cryptocurrencies may not be suited for mass adoption like Web2, but rather are optimized for some narrow but very high-impact use cases like stateless global money, cross-border payments, and decentralized finance.

Chasing mass adoption of normies may be chasing the wrong Grail from the start.

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