Goldfinch CEO Mike Sall. Photo illustration: Annelise Capossela/Axios. Photo courtesy of Mike Sall
The crypto industry needs to break from its tendency to serve and eat its own cooking.
The big picture: "'Financial inclusion' might be a buzz word, but [decentralized finance, or DeFi] has the ability to do this," Mike Sall, co-founder and chief of decentralized credit protocol Goldfinch, tells Axios.
Between the lines: Sall is talking his book: Goldfinch, which runs on the Ethereum blockchain, aims to bootstrap small, non-crypto businesses in emerging countries into the global economy with undercollateralized crypto loans.
Why it matters: Credit protocols like these, including Goldfinch, Maple and Centrifuge, are the next frontiers of lending because they're figuring out how to get capital to businesses that would otherwise go unserved.
How it works: Potential borrowers can propose a so-called Borrower Pool to investors on the platform who are looking to generate yield.
Context: Undercollateralized loans might scare investors in the wake of multiple centralized crypto lenders filing for bankruptcy.
Details: Goldfinch uses a "trust through consensus" mechanism to figure out how to allocate capital from a pool. So the protocol doesn't "trust" one particular investor or auditor, but relies on the collective actions of many.
State of play: Total value locked or TVL, a metric of all assets on the DeFi protocol including coins deposited into liquidity pools, has been in decline, but it's not necessarily due to the contagion caused by the collapse of crypto exchange FTX.
What he's watching: Regulation.
The bottom line: "The ideal would be for Congress to clearly define what crypto “securities” are, and provide clear paths for the tokenization of existing assets, commercial use, and how smart contracts can be recognized legally."
