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Coin issuance and mining simultaneously launched! Unsecured lending protocol "TrueFi" goes live, with FTX CEO providing $3.5 million in support.

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Coin issuance and mining simultaneously launched! Unsecured lending protocol "TrueFi" goes live, with FTX CEO providing $3.5 million in support.

TrueUSD (TUSD), ranked fifth in market capitalization among stablecoins, has launched the uncollateralized lending protocol TrueFi by its developer TrustToken. On November 21st, they initiated liquidity mining for its native token TRU. In addition to TUSD's market cap rising by nearly $60 million, the lending pool has also reached $31.23 million.

Uncollateralized Loan Protocol TrueFi

According to the official announcement, while most DeFi projects currently operate with collateralized loan mechanisms, TrustToken believes that uncollateralized loans are the correct next step for DeFi. Under a controlled risk environment, the mechanism of no collateral required allows borrowers to be willing to pay higher interest rates for loans, while enabling lenders to earn higher returns compared to other lending platforms.

Operation of TrueFi

In a simple explanation of the operation mechanism, lenders can deposit TUSD into the TrueFi pool for lending or participate in TRU token liquidity mining. Any idle funds in TrueFi will be placed in the stablecoin trading protocol Curve to maximize returns.

Borrowers must submit an application including the amount, loan interest rate, repayment period, and Ethereum address. Loans can only be granted upon proposal approval.

TRU token pledgers can vote on proposals (approve or reject). It is important to note that successful voters are rewarded based on the voting results each time, incentivizing TRU pledgers to participate in voting cautiously and actively.

The smart contract of the pool will determine whether a proposal is approved based on the risk mechanism and the voting results of TRU pledgers.

Furthermore, upon successful lending, lenders will receive Pool Tokens similar to promissory notes (TFI-LP) and create a TFI-LP pool, allowing users who do not wish to wait for repayment to sell TFI-LP tokens directly to retrieve assets, although this may result in losses due to insufficient liquidity in the pool.

Lastly, there is a slight uncertainty that if a borrower fails to repay, the official statement claims legal action will be taken according to the loan agreement signed by the borrower, but the legal effectiveness of this loan agreement is currently uncertain.

https://www.youtube.com/watch?v=SctLiJqNqtw

Token Distribution Ratio

The official emphasizes that the TRU tokens "farmed" in the first six months prior to issuance will be burned or reinvested in liquidity mining rewards. No additional tokens will be issued in the future, and the protocol's sole revenue comes from charging a 0.25% fee to borrowers, with the use of revenues to be determined by the community. The token distribution ratio is as follows:

  • Liquidity mining: 39%
  • Private sale: 28.5%
  • Management team: 18.5%
  • Official holdings: 9.5%
  • Future participants: 4.5%
TRU Token Distribution (Source: TrueFi.io)

Participating in Liquidity Mining

Currently, the official release includes five ways to participate in TRU token liquidity mining:

TRU Liquidity Mining (Source: TrueFi.io)

In the Balancer option, the token weights are TRU (2%), BAL (58%), and DAI (40%). The official also notes that a small amount (0.5%) of TRU tokens is allocated to the decentralized insurance protocol Nexus Mutual.

Following the launch of TrueFi, Sam Bankman-Fried, the founder of Alameda known for active involvement in various DeFi protocols, endorsed the project as the first borrower, proposing a $3.5 million loan at 11.5% annual interest rate for 30 days.

The introduction of TrueFi has led to increased demand for TUSD, with the TUSD borrowing annualized yield in the lending protocol Aave soaring over 140%. Renowned DeFi developer Andre Cronje also cautioned users about interest rates on Twitter.

TrueFi aims to become the mainstream protocol for uncollateralized loans. However, beyond attracting attention with token issuance and liquidity mining, concrete results have yet to be demonstrated.

TrueFi Related Data (Source: TrueFi.io)

As shown in the graph above, the only major borrower is the Alameda team. Importantly, the handling of unrecovered loans remains unknown. The official statement also emphasizes that in the event of unsuccessful legal action to recover funds from borrowers who have not repaid, lenders may "lose some or all of their assets."