Issue #2: A $11 trillion market, untapped and waiting to be explored

Summary

• TrueFi a lending platform exploring uncollateralised loans which are approved via the community
• TRU is the token which underpins the system, allowing holders to vote and approve loans
• The market for unsecured loans is untouched and with the future of DAOs and decentralisation growing quickly, which is seen as the next step in creating a decentralised ecosystem
• There is $11T in unsecured loans in Fiat-Currency. Obviously, a huge market is available for the taking and TrueFi is looking to grab this market share

Source: TradingView

What is TrueFi?

TrueFi is a new way of lending and borrowing. It focuses on community interaction approving a loan. They offer four products:

1. Lending
2. Borrowing
3. Farming
4. Staking

The way it works is borrowers (currently only institutional) apply for an amount and a rate. Then community members who stake TRU are able to vote on loan approval, depending on whether they feel the borrower will default on the loan. If approved, the fees of loan applications are paid out to those who voted on the approval. At maturity, borrowers pay back the borrowed amount in full, including interest and the lenders are paid in interest at this time.

Decentralised Finance (DeFi has the following benefits compared to Centralised Finance (CeFi):

1. Complete authority over funds
2. Trustless system
3. Protection of personal data

Explore more about DeFi vs. CeFi here.

Why could TrueFi be valuable?

Much of the DeFi’s success has been built on over collateralized lending, uncollateralized lending and bringing true credit scoring to crypto is widely seen as the next transformative step for DeFi.

Uncollateralised lending provides an opportunity for lenders to earn higher long-term returns than secured lending and allows borrowers to maximise their capital efficiency.

Coming into the future is Layer 2 scaling solutions, protocol-to-protocol lending and most critically, lines of credit.

Funding and Investors

TrueFi has raised about $12.5m in an ICO, with four key investors:

1. BlockTower Capital (Lead Investor)
2. Andreessen Horowitz
3. Alameda Research
4. Darian Shirazi

Future of crypto with DAOs and DeFi

TrueFi brings to DeFi:

1. A legal framework for enforcing action against delinquent borrowers, even without collateral
2. Longstanding, trusted reputation with institutional users to bootstrap a base of high-quality borrowers and lenders
3. Global fiat-backed stable coins that act as an easy on-ramp to TrueFi

It is widely speculated that decentralized communities and DAOs will be the future of crypto. The power to approve / disapprove loans is now in the hands of those who hold the money – removing the intermediary that current lending experiences.

The benefits of the blockchain are explored most importantly in TrueFi with credit ratings. All borrowers are given a credit rating out of 255, based on their loan repayment history. Borrower discovery has never been easier. Stakers can clearly see the history, rating and current owing of any borrowers, allowing for clarity in voting. An example of a borrower is seen below:

Source: TrueFi

TRU Token

Currently the TRU token can be used to:

1. Stake / Vote on loan approval
2. Farm / Lend USD
3. Speculate on future of the project and coin

Staking allows for voting on loan applications and returns 25.82% ROI.  Farming allows for 11.30% ROI yearly.

It’s widely anticipated that TRU coin will be critical for the progress of TrueFi, particularly as it expands to be more and more decentralised.

Market Sentiment

With the continued rapid adoption of cryptocurrency and the whole DeFi industry looking to continue building out the foundations of Financial products, unsecured lending is a critical path:

1. Unsecured lending makes up $11T in the current, fiat market
2. TrueFi demonstrates a 0% default rate at the current moment, showing that these loans are successful
3. On-chain, collateral-free lending (like TrueFi) will ultimately far-outpace DeFi’s existing collateralised lending market.

What we learned from social media

Most importantly, we learned that it is a vibrant community that interact and speculate about the whole market:

• “I want Celsius to build a longer history of repayments before granting them a loan of that size” source
• “Big project + big investors = 100x altcoin” – PeppeMas1
• “solidify themselves within the defi lending ecosystem and become the top-dog in that space.” – SeedlessBananas

Tokenomics

Max Supply: 1.44bn

Token Allocations:

1. Incentives (yields) = 565,500,000 (39%)
2. Pre-Sale = 387,917,402 (26.75%)
3. Team = 268,250,000 (18.5%)
4. Company / Foundation = 163,082,598 (11.25%)
5. Future Team = 65,250,000 (4.5%)

Source: Distribution & Supply

Key Takeaways:

1. Aggressive supply schedule
2. Supply-squeeze might occur if greater incentives are not met for investors
3. Retail borrowing will lead to huge TVL which is critical for adoption

To reach $10 – meaning a $5bn market cap and being a top 20 coin – TrueFi will need more than $10bn in TVL and a decent utilisation ratio (currently at 50%) to reach this. The most likely way this will happen is through close partnerships and ecosystem integration with institutional giants, which will take a few years at least.

Why we chose it

1. Unexplored space and unsecured loans / DeFi still have so far to grow
2. Community and market sentiment sees this as a top altcoin to buy
3. High-level investors
4. Decentralisation of the community and ability to vote for loan approval is critical in decentralisation

Risks to watch out for

1. Large borrowers can out-weigh market and fulfill 80% of the required votes to approve their own loan
2. High gas fees throughout entire system make it infeasible for anyone under $10k to even bother voting
3. A veteran of the DeFi space copying the product to their proven system and capturing large market-share

Bottom Line

The future of unsecured lending is untapped and has high potential to overtake current DeFi lending projects. However, it is critical that TrueFi solve voter verification and the high gas fees to make it a stronger product. We’re very bullish on the next 1-year to 5-year potential of this project and see it capturing an unexplored market.

What can I do from here?

1. Buy TRU from any of these exchanges here. Difficulty: Beginner
2. Stake TRU to earn 25.82% here. Difficulty: Intermediate
3. Lend USD to earn up to 7.34% here. Difficulty: Expert
4. Farm TRU after lending USD to earn up to 11.5% here. Difficulty: Expert

Who should I follow?

TrustToken – Constant updates of the platform

Rafael Cosman – Key insights into future of TrueFi****

TrueFi’s Medium Page – for key updates and official writings

Discord – Key engagement with the community

TrueFi’s Forum – for any proposals and new ideas

Further Reading:

What is TrueFi (TRU) | History, Roadmap, Economics | Messari

Introduction to the TrueFi Platform Tokens

Uncollateralized Lending Platform TrueFi Plans to Go Big in 2021