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Borrowers are participants who seek financing from the protocol. They propose terms to Backers to supply capital to their Borrower Pools.
A Borrower Pool is the smart contract through which Borrowers borrow and repay capital. Once approved by Auditors, any Borrower can create a Borrower Pool and define the terms they want:
Interest Rate: Fixed interest rate APR, e.g. 15%.
Limit: Total capital that can be borrowed, e.g. $10M.
Payment Frequency: Frequency of interest and principal payments, e.g. every 30 days.
Term: The length of time until the full principal is due, e.g. 365 days.
Late Fee: Additional interest owed when payments are late, e.g. 5%.
Creating a Borrower Pool is like proposing a “term sheet” to Backers. It does not guarantee the terms will be accepted, since Borrowers then need to convince Backers to supply junior tranche (first-loss) capital to the Pool. The amount Borrowers can borrow is based on how much Backers supply, combined with the correlated amount the Senior Pool allocates based on the Leverage Model.
Notably, Borrowers need to set a limit for their Borrower Pools: a self-imposed cap on how much capital they can borrow, also referred to as the Pool limit. While Borrowers might ideally want an infinite limit, Backers want to know that they are only staking first-loss capital toward a total potential amount that the Borrowers can safely deploy. Borrowers therefore have an incentive to set the limit only as high as they can convince Backers that they can safely use and repay.
In order to create a Borrower Pool, the Borrower must also stake an amount of GFI equal to double the cost of an Auditor approval, which is a fixed rate set by the protocol and determined by community governance. This helps guard against spam, signals to Backers that the Borrower is serious, and provides GFI to pay for the first Auditor approval. The first half of the staked GFI is used for the first Auditor approval. The Borrower can redeem their remaining staked GFI when they have fully repaid their borrowed balance.
Borrowers can borrow capital through the Borrower Pool at any time. The total amount they can borrow is the minimum of:
A. The calculated limit based on the capital that Backers have supplied and the capital automatically allocated by the Senior Pool according to the Leverage Model.
B. The combined total capital that Backers have supplied in that Borrower Pool plus the remaining capital in the Senior Pool.
C. The Borrower Pool's limit.
After borrowing, Borrowers make repayments to the Borrower Pool according to its interest rate and payment period. When they pay more than the interest owed, the remainder is applied to the principal balance.
Borrower Pool smart contracts have both a junior and senior tranche. Backers supply capital directly to the junior tranche, and the Senior Pool supplies capital to the senior tranche. When a Borrower makes repayments, the Borrower Pool applies the amount first toward any interest and principal owed to the senior tranche at that time, and then toward any interest and principal owed to the junior tranche at that time.
To track the different amounts that different participants supply, both the Backers and the Senior Pool receive an NFT when they supply capital. The NFT tracks the amount that was supplied and how much of it has been redeemed. At any time, a Backer or the Senior Pool can use their NFT to redeem their specific portion of the available repayments in the Pool.
The Borrower Pools use NFTs rather than fungible tokens because it allows the protocol to ensure that no one redeems more than their proportional share of the total repayments as they come in.
For example, let’s say two Backers have each supplied $500 for a total of $1,000 borrowed, and that so far the Borrower has made repayments totaling $300. In this scenario, the NFTs ensure each Backer can only redeem up to $150, which is their portion of the repayments so far, rather than each one racing to redeem the full $300 for themselves.
There may be certain participants who work with Borrowers to establish terms and bring them to the protocol. To compensate them for these efforts, Borrower Pools support an origination fee that is paid to the Pool's originator.
The origination fee is defined as a percentage of the interest. For example, for a $1M Borrower Pool with 15% interest paid monthly and a 10% origination fee, the Borrower would pay monthly interest of $12.5K and the originator would receive a monthly fee of $1.25K. To align incentives with Investors, the originator fee is treated as the most junior tranche, so every payment first goes toward what is owed to the Senior Pool (senior tranche) and Backers (junior tranche) before it goes toward the originator fee.
A key question is what incentives Borrowers have to pay back what they borrow
The first incentive is the establishment of a positive on-chain credit history. Because Borrowers need to publicize their wallet address when proposing pools to Backers, their on-chain history becomes public to future creditors—even those off-chain. As more of global finance moves on-chain, creating a negative on-chain credit history is comparable for future credit opportunities to creating a negative off-chain credit score or record.
The second incentive is that Borrowers will likely want to continue borrowing from Goldfinch. The moment they are late on any payment, Borrowers are unable to borrow further from any Borrower Pool.
While not explicitly supported by the protocol, a third incentive is that Backers may form off-chain legal agreements with Borrowers, including requiring Borrowers to collateralize their on-chain loan with off-chain collateral. Backers may require such an agreement to be in effect, either with them directly or with another Backer, in order to be willing to supply capital. In these cases, the legal agreement and potential Investor recourse are another important incentive for Borrowers. Currently, all loans on Goldfinch are fully collateralized with off-chain assets via this mechanism.
In addition, while occasional defaults are common across finance, Backers will likely stop supplying more capital to any of a Borrower’s pools if the Borrower is consistently late on repayments. It is up to Backer to evaluate whether Borrowers are qualified and have a good enough track record to garner Backer investment in any future pools the Borrower proposes.
Auditors perform human-level checks on Borrowers to confirm they are legitimate, helping to secure the protocol against fraud. Borrowers need the approval of Auditors to borrow from Borrower Pools. Currently, the protocol's Auditor system is not yet live, but it is expected that the community will introduce and vote on a proposal to implement auditing in the coming months.
Borrowers need an approval vote from Auditors in order to borrow. Auditors stake GFI in order to be selected for votes, and they earn GFI rewards when they vote with the majority of other Auditors, according to the rules described below.
Anyone can be an Auditor by staking a minimum amount of GFI and passing the
Unique Entity Check. When a vote is requested, the protocol selects 9 Auditors on a
random basis weighted by the amount of GFI they have staked.
When selected for a vote, Auditors evaluate whether Borrowers appear to be legitimate.
In this vote, the Auditors are not evaluating the Borrower’s creditworthiness — rather,
they are providing a confirmation that the Borrower does what they claim to do and
that they do not appear to be colluding with any other participants.
Auditors can do whatever they like to decide how to vote. In practice, they may review
off-chain documents provided by Borrowers and communicate with Borrowers directly
through channels such as forums, email, and video calls. This can all occur off-chain on
a variety of platforms. The protocol only needs the final vote and is agnostic to how
Auditors arrive at their vote.
Borrowers can request an approval vote once their first Borrower Pool has reached at least 20% of its limit and they have staked enough GFI to reward Auditors for the vote. If more than 2 Auditors vote “No”, the Borrower's full GFI staked amount is slashed.
In addition to the Borrower making their first approval request, anyone can use GFI to pay for an approval request at any time. This is helpful if someone believes a prior approval vote had an incorrect result, or if someone believes the Borrower has started to act fraudulently and should lose their approval.
Once selected, auditors have 48 hours to provide a Yes
, Unsure
, or No
vote. Their GFI is slashed if they:
don’t vote within the 48 hour window,
vote Yes
when the majority vote No
, or
vote No
when the majority vote Yes.
If they vote Unsure
, there is no penalty but also no reward.
Based on the way Auditors vote, there are three potential outcomes:
Full Approval: This occurs when there are at least 6 Yes
votes and no more than 1 No
vote. The Borrower is approved to access capital, and the Senior Pool allocates capital to their Borrower Pools.
Backer-Only Approval: This occurs when there are at least 6 Yes
or Unsure
votes, and no more than 1 No
vote. The Borrower is approved to access capital, but the Senior Pool does not allocate capital to their Borrower Pools.
No Approval: This occurs when there is more than 1 No
vote, or when there are not enough votes to meet the above approval thresholds. The Borrower is not approved to access any capital.
Auditors are incentivized to participate and vote correctly in order to earn GFI rewards. Also, by staking GFI, they are both incentivized to participate as expected in order to avoid having their stake slashed and are also naturally aligned with the long-term success of the protocol.
Liquidity Providers optimize for diversification and liquidity
Liquidity Providers are Investors who supply USDC to Goldfinch by investing in the Senior Pool. This Senior Pool capital is automatically allocated across Borrower Pools.
Liquidity Providers supply capital to the Senior Pool in order to earn yields optimized for ease and diversification. The Senior Pool automatically allocates that capital across the senior tranches (second-loss) of Borrower Pools according to the Leverage Model.
In this way, when more Backers actively evaluate a Pool's terms and decide to invest first-loss capital in it, the Senior Pool will in turn automatically allocate more second-loss capital to the Pool. The Senior Pool thereby provides both diversification across Borrower Pools and seniority to the first-loss capital of Backers. This process does not involve seeking the permission of different Borrowers.
To compensate Backers for providing the work of both evaluating Borrowers Pools and providing first-loss capital, 20% of the Senior Pool’s nominal interest is reallocated to Backers.
As a result, the Senior Pool earns an effective interest rate equal to 70% of the nominal interest rate. Or, in terms of the nominal interest rate, , protocol reserve allocation, , and junior reallocation percent, :
Accordingly, based on these same inputs and the leverage ratio, , Backers receive an effective interest rate of:
For example: Consider a Borrower Pool with a 15% interest rate and 4.0X leverage ratio. If the Backers supply $200K
, the Senior Pool will allocate another $800K
. Assuming the Borrower borrows the full $1M
for one year, they will pay $1M * 15% = $150K
in interest. Of that, the Senior Pool receives 0.15*(1 - 0.1 - 0.2) = 10.5%
interest, or $800K * 0.105 = $84K
. The Backers receive 0.15*(1 - 0.1 + 4*0.2) = 25.5%
interest, or $200K * 0.255 = $51K
. The remaining $15K
is the 10%
protocol reserve allocation.
For a step-by-step on supplying to the Senior Pool, read the documentation's Investor How-To section.
When Liquidity Providers supply to the Senior Pool, they receive an equivalent amount of FIDU. FIDU is an ERC20 token.
At any time, Liquidity Providers can withdraw their position by depositing their FIDU to a Withdrawal Request, to redeem their FIDU for USDC at an exchange rate based on the net asset value of the Senior Pool, minus a 0.5% withdrawal fee. This exchange rate for FIDU increases over time as interest payments are made back to the Senior Pool.
Withdrawal Requests are fulfilled every two weeks. It is possible that when a Liquidity Provider wants to withdraw, the Senior Pool may not have sufficient USDC because it has been borrowed by Borrowers. If there is enough USDC unutilized in the Pool to honor all outstanding withdrawal requests at the end of the distribution period, all withdrawers will receive 100% of the value of the FIDU they requested to withdraw, in USDC, minus the 0.5% withdraw fee.
If there is not enough USDC in the Senior Pool to honor all outstanding Withdrawal Requests at the end of the period, due to the USDC being actively utilized by Borrowers, all available USDC will be allocated to withdrawers pro-rata
You can learn more about how Withdrawal Requests work in the Liquidity section of the documentation.
Liquidity providers are incentivized to supply to the Senior Pool in order to earn automatically allocated yields, as their capital is diversified across different Borrower Pools.
Backers optimize for yield and selection
Backers are Investors who supply USDC to individual Borrower Pools. Backers evaluate individual deals, and lend directly to specific Borrower Pools with first-loss capital.
Backers look at Borrower Pools and Callable Deals as investment opportunities. They evaluate the information Borrowers provide, and decide if they want to supply capital (junior tranche capital for Borrower Pools; unitranche for Callable Deals).
To track the different amounts that different participants supply, Backers receive an NFT when they supply capital. The NFT tracks the amount that was supplied and how much of it has been redeemed. Backers can use their NFT to redeem their specific portion of the available repayments in the Pool or Deal, depending on the type of deal.
The Callable Deal loan structure gives Backers the right to “call back” their invested capital before the loan term has ended. Borrowers are required to return 100% of this “called capital” at the end of a “call period.”
Callable loans are an existing structure in traditional finance that provides liquidity to investors by giving them the right to “call back” their capital at regular intervals. Goldfinch's initial design of callable deals sets call periods to occur every three months; call requests must be submitted at minimum 60 days before the end of the call period (any calls that occur less than 60 days before the closest upcoming repayment date will be paid on the second closest upcoming repayment date).
Backers evaluate the information Borrowers provide and decide if they want to supply first-loss capital (junior tranche) to fund a Borrower Pool.
The Senior Pool provides additional second-loss (senior tranche) capital to the Borrower Pool according to the Leverage Model. To account for the lower risk of the senior tranche, 20% of the senior tranche’s nominal interest is reallocated to the junior tranche. In addition, the protocol retains 10% of all interest payments as reserves, which are managed by the decentralized Governance.
As a result, the Senior Pool earns an effective interest rate equal to 70% of the nominal interest rate. Or, in terms of the nominal interest rate, , protocol reserve allocation, , and junior reallocation percent, :
For example: Consider a Borrower Pool with a 15% interest rate and 4.0X leverage ratio. If the Backers supply $200K
, the Senior Pool will allocate another $800K
. Assuming the Borrower borrows the full $1M
for one year, they will pay $1M * 15% = $150K
in interest. Of that, the Senior Pool receives 0.15*(1 - 0.1 - 0.2) = 10.5%
interest, or $800K * 0.105 = $84K
. The Backers receive 0.15*(1 - 0.1 + 4*0.2) = 25.5%
interest, or $200K * 0.255 = $51K
. The remaining $15K
is the 10%
protocol reserve allocation.
For a step-by-step on supplying to Borrower Pools, read the documentation's Investor How-To section.
It is easier to feel confident supplying to a Borrower Pool when a lot of other Backers have already vetted and supplied to it, and the Senior Pool is already adding leverage. It is riskier to be the first one in a Borrower Pool. To incentivize early Backers, the protocol provides an additional GFI reward to all Backers who contribute early on, with the reward amount decreasing for later Backers as the Borrower Pool reaches its limit.
The protocol assigns the reward when a Backer supplies, but the reward is not immediately claimable. The percent of the reward that is claimable is proportional to the percentage of the full expected repayment of principal plus interest that the Borrower successfully repays. This ensures the Backer only receives the early Backer reward after the Borrower Pool proves valuable to the protocol.
Note: As of August 2022 staking on Backers is not yet live on Goldfinch.
In addition to evaluating individual Borrower Pools, Backers may also evaluate other Backers in order to give them leverage. Backers can do this by staking GFI directly on another Backer.
Based on the amount of GFI staked on a given Backer, the Senior Pool uses the Leverage Model to calculate a leverage ratio and allocate capital whenever that Backer supplies to Borrower Pools. For example, if a Backer has a leverage ratio of 4.0X based on the GFI staked on them by other Backers, then anytime they supply to a Borrower Pool, the Senior Pool will allocate 4.0X of that amount.
The Senior Pool provides this leverage up to a maximum total that is calculated as the leverage ratio multiplied by the total value of GFI staked on that Backer. For example, if the Backer has $1M worth of GFI staked on them with a 4.0X leverage ratio, the Senior Pool will allocate up to $4M total leverage.
When GFI is staked on a Backer, that GFI serves as collateral against potential defaults for that Backer’s positions in Borrower Pools. When a Borrower defaults, the GFI staked on all the Backers in that pool are reallocated to the senior tranche until the senior tranche is made whole on their expected payments. This incentivizes Backers to stake on other Backers who supply to safe Borrower Pools.
To reward Backers for staking GFI on other Backers, the protocol distributes GFI to them on a regular basis. The protocol allocates the distributions in proportion to the interest their leveraged GFI earns. This incentivizes Backers to stake on other Backers who supply to high-yielding Borrower Pools.
Backers have an incentive to provide first-loss capital to Borrower Pools as they can receive both early Backer rewards and higher effective yields based on the Senior Pool leverage. In the future they will also have an incentive to stake GFI on other Backers as they will be able to earn additional rewards when that Backer supplies to Borrower Pools.
Join a Membership Vault as an active Goldfinch Investor to upgrade your Goldfinch participation and support Goldfinch’s growth and expansion.
Goldfinch Membership is the first phase of a broader tokenomics redesign (), which was approved by the community in 2022 and focuses on enhancing the utility of GFI.
Membership is designed to empower Goldfinch Investors to support the protocol’s growth while increasing their participation.
Goldfinch Members receive yield enhancements via Member Rewards, which have been earmarked from the Goldfinch treasury and are distributed pro-rata based on one’s Membership Vault position. In addition, Members will gain access to exclusive communication channels, special offers, and more.
Encouraging Investors to hold GFI will help to increase community participation in —which requires GFI—as well as further aligning and incentivizing the Goldfinch community’s interest in the long-term success of the protocol.
Membership also encourages the single biggest lever for network growth, increased TVL, resulting in a more robust and secure protocol ecosystem while also rewarding the global community of Goldfinch participants who continue to contribute to Goldfinch’s growth and resilience.
There are only two requirements to participate in Goldfinch Membership: being a or on Goldfinch (represented by holding staked FIDU and/or an active Backer NFT), and holding .
To become a Member, one only needs to lock their staked FIDU or Backer NFTs, plus GFI, into the .
To optimize the yields you can receive, balanced is best: matching the dollar value of the GFI and assets you deposit to the vault will balance the vault ratio and increase your potential Member Reward yield.
You can withdraw your deposited assets from the vault at any time, and there is no risk of slashing when participating in a Membership Vault. However, if you withdraw your assets from the vault before the end of a reward cycle (weekly), you will forfeit any Member Rewards accumulated during that cycle.
While future releases are expected to launch support for joining a Membership Vault by depositing Curve FIDU/USDC LP Tokens or staked Curve FIDU/USDC LP Tokens, at launch the vaults only accept Backer PoolToken NFTs, representing participation in a Goldfinch Borrower Pool, or staked FIDU, Goldfinch Senior Pool tokens that have been staked in the dapp to receive extra GFI rewards. If you hold unstaked FIDU, you can stake it to be able to supply it to a Membership Vault by following .
Member Rewards are a form of yield enhancement to further align and incentivize Goldfinch Investors’ interest in the long-term success of the protocol.
Member Rewards are distributed weekly in .
Member Rewards come from an earmarked percentage of Goldfinch’s Treasury, and are paid pro-rata to Members—meaning that the higher the percentage of the Membership Vault’s assets one supplied during a reward cycle, the higher percentage of Member Rewards one will receive for that cycle.
Member Rewards are distributed weekly in FIDU, naturally increasing Members’ exposure to Goldfinch’s Senior Pool to increase their opportunities to receive yields. Rewards must be claimed manually, can then be staked to receive additional GFI rewards, and then can be deposited to the Membership Vault alongside GFI, increasing one’s interest in the Membership Vault to receive additional Member Rewards.
If a participant deposits assets into the Membership Vault during a weekly reward cycle their assets will begin accumulating Member Rewards at the beginning of the next weekly reward cycle. While Members can withdraw their deposited assets at any time to exit Membership, if they withdraw before the end of a weekly reward cycle they will forfeit any Member Rewards they would have received during that cycle.
Following launch, Members will also have access to exclusive communication channels, special offers, and more.
The Member Rewards share calculation is a governance-controlled parameter that determines the optimal share of Capital and GFI for maximizing rewards in Membership Vaults.
The two variables in the Member Reward equation that are determined by governance are:
μ = Share of earmarked treasury used for Member Rewards
You can think of this as “What percentage of the earmarked treasury allocation should be allocated to members?”
Currently, μ = 50%
α = Capital supply amplification weight.
You can think of this as “How much should we weight locked capital supply, versus locked GFI for fee shares?”
Currently α = 0.50
The estimated Member Rewards displayed in the Goldfinch platform are calculated based on a) one’s Membership Vault position, and b) on the distribution of total capital in the Membership Vault overall.
This number is an estimate because rewards are distributed pro-rata to Members at the end of each reward cycle—as such, oter Investors entering or exiting the Membership Vault during a reward cycle will change the percentage of rewards one is expected to receive, due to changing what percentage of the Vault one’s individual position represents.
The estimated Member Rewards displayed is a dynamic number that reflects the distribution of total capital in the Membership Vault overall at that moment in time and one’s Member Vault position at that moment in time.
The total APY (Annual Percentage Yield) earned by Backers of a Borrower Pool is the sum of three parts:
The base interest USDC APY of a Pool’s Junior Tranche is the base-level incentive a Backer can receive from participating in the protocol. This base USDC APY originates from the Borrower’s repayments and is a core feature of the Goldfinch protocol.
Backer Bonus is the APY from GFI earned uniquely by Backers, which is made up of the combined BackerRewards contract functions of Backer Rewards, from the Pool’s interest repayments, and Backer Staking Rewards, the APY from GFI earned by Backers equivalent to the APY from GFI earned by Liquidity Providers who supply to the Senior Pool.
In addition to the total APY earned by backers:
Early Backer Airdrop — A GFI reward provided to Backers who contributed to a Pool before the implementation of the community governance proposals for Backer Rewards and Backer Staking Rewards mechanisms.
Backer Rewards and Backer Staking Rewards are functions of the BackerRewards contract. This was passed by community governance to ensure that a Backer’s incentives are always higher than those of a Senior Pool participant’s, in order to preserve the protocol’s consistent risk/reward tradeoff, with Backers, who take on the most risk, rewarded the most highly.
The Early Backer Airdrop was passed by to retroactively reward Backers of pools that were funded prior to the development of the Backer Rewards and Backer Staking Rewards mechanisms.
Staking on Backers, detailed below, is an element of the and as of April 2022 have not yet been implemented as a live feature on the protocol.
Backers of pools that were funded before the Backer Rewards and Backer Staking Rewards mechanisms were developed received a one-time airdrop, to reward their early support of the protocol. The parameters of the airdrop were defined in the passed by community governance.
Backer Rewards are distributed as GFI rewards to Backers for interest payments made by different Borrowers. For every dollar of interest that a Borrower repays, a Backer will earn an amount of GFI. To incentivize early participation in the protocol, this amount decreases based on the total amount of interest that has been repaid to the Goldfinch protocol as a whole.
The protocol does this to incentivize Backers who are evaluating pools to fully take into account the likelihood that interest payments will be made successfully and on time to the Pool, and to provide an incentive for Backers to hold Borrowers accountable to their obligations.
This means that how much GFI a Backer earns for a dollar of interest is not a fixed value, i.e. at one point in time a Backer may earn a large amount of GFI per dollar of interest, but later in the protocol’s lifecycle they may earn less GFI per dollar of interest. Concretely, the rewards fall off on a square root curve and will eventually fall to 0 once $100MM total dollars of interest has been repaid by Borrowers to the Goldfinch protocol as a whole. As such, Backers who participate in the protocol’s earliest pools will receive more rewards than Backers who take part later on, when the protocol’s usage has grown.
Backer Staking Rewards take the form of GFI distributed to Backers in exchange for their role taking on the additional risk of providing first-loss capital to Backer Pools. This is achieved by providing Backers equivalent GFI rewards as if they had deposited and staked in the protocol’s Senior Pool. The protocol does this so that Backers are compensated fairly for the increased risk they take on in the protocol.
Upon a successful repayment from a Borrower, a Backer will be able to claim the full amount of Backer Staking Rewards they've earned since the last time they claimed. Partial repayments made by the Borrower to their Pool do not entitle Backers to rewards, only full payments. However, if a Borrower eventually does make a repayment on their outstanding obligations, Backers will not be penalized and will receive the same rewards as if the incomplete payment never occurred.
From the time of drawdown of the Pool's Backer capital, until the term end time of the loan, the protocol calculates an amount of "virtual" FIDU, corresponding to the borrowed amount of capital supplied by the backer, that would have earned the APY-from-GFI of Senior Pool staking, if that amount of FIDU had been staked in the Senior Pool. The backer earns an equivalent[^1] amount of GFI as they would have earned from staking this amount of “virtual” FIDU in the Senior Pool.
[^1]: We say "equivalent" rather than "equal" due to a subtlety of implementation in the calculation logic relating to the term end time of the loan.
The GFI earned from Backer Rewards and Backer Staking Rewards is not subject to a lockup period once it is earned. But the GFI of Backer Rewards and Backer Staking Rewards is only earned by Backers upon an interest repayment to the pool by the Borrower, at which time the earnings from Backer Rewards and Backer Staking Rewards are checkpointed and a corresponding additional amount of GFI since the last checkpoint becomes claimable by backers.
In addition to evaluating individual Borrower Pools, Backers may also evaluate other Backers in order to give them leverage. Backers can do this by staking GFI directly on another Backer. Based on the amount of GFI staked on a given Backer, the Senior Pool uses the Leverage Model to calculate a leverage ratio and allocate capital whenever that Backer supplies to Borrower Pools. For example, if a Backer has a leverage ratio of 4.0X based on who has staked GFI on them, then anytime they supply to a Borrower Pool, the Senior Pool will allocate up to 4.0X of that amount.
The Senior Pool provides this leverage up to a maximum total that is calculated as the leverage ratio multiplied by the total value of GFI staked on that Backer. For example, if the Backer has $1M worth of GFI staked on them with a 4.0X leverage ratio, the Senior Pool will allocate up to $4M total leverage.
When GFI is staked on a Backer, that GFI serves as collateral against potential defaults for that Backer’s positions in Borrower Pools. When a Borrower defaults, the GFI staked on all the Backers in that pool are reallocated to the senior tranche until the senior tranche is made whole on their expected payments. This incentivizes Backers to stake on other Backers who supply to safe Borrower Pools.
To reward Backers for staking GFI on other Backers, the protocol distributes GFI to them on a regular basis. The protocol allocates the distributions in proportion to the interest their leveraged GFI earns. This incentivizes Backers to stake on other Backers who supply to high-yielding Borrower Pools.
Backers have an incentive to provide first-loss capital to Borrower Pools because they can receive both Backer rewards and higher effective yields based on the Senior Pool leverage. To help ensure that Backers are always receiving as much or higher of an APY on their pool participation as Senior Pool Participants, Backer Rewards and Backer Staking Rewards are also distributed based on participation. In the future, Backers will also have an incentive to stake GFI on other Backers as they will be able to earn additional rewards when that Backer supplies to Borrower Pools.
Liquidity Providers can earn GFI by staking the FIDU they receive for supplying to the Senior Pool.
GFI tokens are granted at a variable distribution rate, which is based on a target pool balance set by Governance. More tokens are distributed when the pool is under the target, and less are distributed when it is over the target. The further under the target the pool balance is, the more GFI tokens are distributed. This helps incentivize a healthy utilization and APY for the pool, relative to loans outstanding.
All FIDU liquidity miners, including those who staked FIDU prior to the implementation of community proposal GIP-10 on July 20, 2022, can withdraw from staking at any time and receive the full value of their vested GFI liquidity mining rewards at withdrawal. See below for more details.
The GFI distributions rate is calculated using several parameters, all set by Governance:
Target balance: The ideal total balance of the Senior Pool. The community can decide this balance based on expected future capital needs. It should be high enough to attract the amount of capital the protocol will need, but not too high that the protocol unnecessarily distributes GFI to unused capital.
Minimum rate: The lowest possible rate of GFI distributed per second.
Maximum rate: The highest possible rate of GFI distributed per second.
Target range: T\he range around the "Target balance" along which the min and max distribution rate are applied. It is represented as two percentages (e.g. min: 50% of the target balance, max: 200% of the target balance).
The reward rate can be thought of as a piecewise linear function that looks something like this:
Inside the target range, the distribution rate linearly decreases from "Maximum rate" to "Minimum rate"
Below the target range, the distribution rate is constant at "Maximum rate"
Above the target range, the distribution rate is constant at "Minimum rate"
In other words, when the pool balance is below its target, the distribution rate will be higher, incentivizing more people to supply capital to the pool. When the pool balance is above its target, the distribution rate will be lower, incentivizing withdrawals.
As of January 11 2021, the distribution rate parameters have been set as follows:
Target balance: $100M
Minimum rate: 0 GFI
Maximum rate: 0.5% of GFI supply per month (this equals 0.217438574961948 GFI / second)
Target range: $50M to $200M (50% to 200%)
Governance can always decide to change these parameters.
The GFI distributions received from liquidity mining can be withdrawn at any time, with no unlock period or slashing. FIDU stakers can stake and unstake at will without forfeiting any of the GFI rewards they have earned. You can learn how to stake FIDU in the Participating in Liquidity Mining section of the documentation.
FIDU staked prior to July 20, 2022
Before July 20, 2022, the GFI distributions received from liquidity mining unlocked linearly over the first 12 months of staking with early withdrawals forfeiting any remaining locked rewards. This meant that a liquidity provider could withdraw from staking whenever they chose, but would forfeit some GFI distributions if they withdrew before 12 months.
This was updated by the implementation of community proposal GIP-10 to make the GFI rewards received for liquidity mining withdrawable at any time with no unlock period or slashing. To ensure that the new system did not hurt existing FIDU stakers in any way when implemented, the proposal also removes slashing for Liquidity Providers who staked FIDU before July 20, 2022.
If a Liquidity Provider who staked FIDU before July 20, 2022 withdraws, the part of their GFI rewards that would have been slashed under the original rewards design will instead not be slashed and will unlock over their remaining 12 month period. The Liquidity Provider will continue to earn their remaining GFI rewards, and can un-stake and re-stake their FIDU to begin receiving GFI rewards with no unlock/vesting period moving forward.
Because the Leverage Model relies on "trust through consensus", and also to help avoid , it is critical for the protocol to have confidence that each Borrower, Backer, and Auditor is a unique entity. Therefore, they must each be verified with a Unique Entity Check
before they can participate.
Currently, the protocol uses as its Unique Entity Check provider. View the section of the documentation to learn about UID, how it works, and how to get started.
Accordingly, based on these same inputs and the leverage ratio, , Backers receive an effective interest rate of:
A Member’s precise share of Member Rewards is calculated using the , an equation commonly used in economic analysis for balanced input relationships generating an output, and also used by protocols such as 0x and The Graph for reward systems. All values are for a given weekly period:
The μ and α values can be changed by governance vote. μ = 50% allows the protocol to build sufficient stablecoin reserves for future needs, like community grants, and α = 0.50 is a good starting point to observe how dynamics play out between the balances of capital supply and GFI. You can learn in-depth about how Member Rewards are calculated in the original .
Backer Staking Rewards is an implementation of the accepted Goldfinch governance proposal titled ".”
Backer Rewards Interest repayments to a Pool earn GFI for Backers according to the parameters of the approved . Thus 2% of the total GFI supply is allocated for this purpose, to be earned upon the first $100M of interest repaid to the protocol. GFI are earned at an "exponentially decelerating rate" across all interest dollars repaid to eligible pools; the exact formula can be found in the documentation of the smart contract.
Staking on Backers, detailed below, is an element of the which as of June 2022 has not yet been implemented as a live feature on the protocol.
All investors on Goldfinch receive two core incentives for their participation in the protocol:
USDC APY — The base-level USDC return an Investor receives for participating in Goldfinch, generated from Borrowers' interest payments on their loans. The USDC APY is defined in the Borrowers' financing terms when they establish Borrower Pools. For Backers, this APY is a fixed rate as defined by the Borrower Pool's terms. For Liquidity Providers, this rate is estimated as the Senior Pool's USDC returns vary based on the Senior Pool's usage and balance.
Investor Rewards — The additional GFI return all Investors on Goldfinch receive in exchange for their participation in the protocol. Investor Rewards are an estimated return as they are not defined by Borrowers' financing terms, but are instead dependent on tokenomics and network dynamics.
Investor Rewards vary based on whether one is participating in Goldfinch as a Backer or as a Liquidity Provider. There are specific rewards to incentivize Backers for taking on the risk of providing the protocol's junior capital as well as for their work evaluating Borrower Pool deals, while Liquidity Providers can receive Investor Rewards by participating in Senior Pool Liquidity Mining. Read on for the breakdown of Backer Incentives and Senior Pool Liquidity Mining.
In addition, LPs of the Curve FIDU<>USDC Liquidity Pool can also earn rewards for staking their Curve LP tokens. Learn more about Curve LP incentives in the Staking section of the documentation.
GFI is the official token of Goldfinch.
The contract address for GFI is 0xdab396cCF3d84Cf2D07C4454e10C8A6F5b008D2b.
The Goldfinch Protocol's core native token is GFI, and it is used for the following purposes:
Community Governance: GFI is the token used for Community Governance. GFI holders can participate in governance to decide the direction of the protocol. Learn more about Governance here.
Community Grants: The community can provide grants and/or bounties to participants that meaningfully contribute to the Goldfinch protocol and ecosystem.
According to the whitepaper, GFI will also serve the following functions. These are not live yet, but it is expected that the community will introduce and vote on proposals for them in the coming months:
(More) Participant Incentives: Backers who both supply to Borrower Pools and stake on other Backers, Auditors who stake to participate in votes, and Borrowers who successfully repay their pools.
Backer Staking: Backers can stake their GFI tokens on other Backers in order to give them additional leverage when participating in Borrower Pools. This GFI also serves as a backstop against potential loan defaults.
Auditor Votes: Auditor votes are required to grant Borrowers permission to borrow from the protocol, and Borrowers pay for these votes with the GFI token.
Auditor Staking: Auditors stake the GFI token in order to be selected to participate in Auditor Votes.
You can learn more about the GFI distribution parameters and inflation in the Tokenomics section of the documentation.
Because the protocol does not require crypto overcollateralization, new potential vectors for fraud are possible. It is worth discussing each one in depth, and how the protocol builds resistance against it. Please note that these scenarios focus on malicious or dishonest activity, not poor performance of well-intentioned borrowing.
A fraudulent Borrower could first attempt to fool both Auditors and Backers into thinking they are legitimate, and then borrow capital without repaying it.
The first guard against this are the Auditors, who must approve Borrowers before borrowing. Because Auditors are randomly selected, it is difficult to collude with them.
The second guard are the Backers, who are highly incentivized to analyze their investment choices closely as they supply higher-risk junior capital—meaning they will be the last to be repaid if a Borrower was to default. It is likely that Backers will want to do extra research on Borrowers and potentially communicate with them directly.
Lastly, Backers may sign off-chain legal contracts with Borrowers, which opens Borrowers to legal recourse. Currently all loans on Goldfinch are fully collateralized with off-chain assets and legal contracts.
A Borrower could collude with people they know to act as Backers and supply to their Borrower Pool. This would artificially increase the leverage ratio and fool the Senior Pool into allocating additional capital.
The first guard against this are the Auditors, who must approve Borrowers before they are able to borrow. Because Auditors are randomly selected, it is difficult to collude with them.
The second guard is that it requires many individually verified Backers to supply significant amounts of upfront capital in order for the Senior Pool to provide leverage, which makes such collusion with Backers difficult and expensive.
Lastly, the Unique Entity Check adds Sybil Resistance by making it difficult to programmatically create fake Backers.
A Borrower could collude with Auditors to obtain approval for creating Borrower Pools when the Borrower is in fact not legitimate.
The first guard against this is that the requirement of a Unique Entity Check prevents a Sybil Attack, where fake Auditors are programmatically created to overwhelm the system. Instead, each Auditor must be a verified entity.
The second guard is that Auditors must stake GFI in order to participate, which is slashed if they vote differently than the majority of Auditors. This incentivizes Auditors to act honestly in order to preserve their stake.
The third guard is that Auditors are randomly selected, weighted by their staked GFI, so it would require staking a significant amount of upfront capital to be chosen frequently enough to skew the votes.
The fourth guard is that anyone can request an approval at any time, so it would require colluding for all potential future votes rather than just one.
Lastly, even if a fraudulent borrower successfully colludes with Auditors, they must also convince many Backers to risk their own capital by depositing to the Pool.
An individual or group of Backers might supply to a particular Borrower Pool even when they don’t view it as a good risk. This would artificially increase the leverage ratio and fool the Senior Pool into allocating additional capital, boosting the Backers' returns.
The first guard against this is that the Unique Entity Check requires each Backer to be verified, preventing a Sybil Attack of programmatically-created Backers and instead requiring the coordination of many people to achieve Backer collusion.
The second guard against this is that it requires the Backers to take real risk by supplying first-loss capital. The Backers only achieve higher returns if the Borrower does in fact pay back what they borrow, in which case it is beneficial to all participants in the protocol, including the Senior Pool.
The Leverage Model determines how much capital the Senior Pool allocates toward each Borrower Pool, based on how much it trusts
each Borrower Pool. Currently, the automated Leverage Model as described here is not yet live, but it was included in the community-approved roadmap for near-term development linked here.
In order to determine how to allocate capital from the Senior Pool, the protocol uses the novel principle of "trust through consensus." This means that while the protocol doesn't trust any individual Backer or Auditor, it does trust the collective actions of many of them. At a high level: when more Backers supply capital to a given Borrower Pool, the Senior Pool increases the ratio with which it adds leverage.
Because this approach relies on counting individual Backers, the protocol must ensure they are in fact represented by different people. Therefore, all Backers, Borrowers, and Auditors require a unique entity check
to participate (see the Unique Entity Check section).
The leverage amount, , that the Senior Pool allocates is determined by the formula, where:
is the total capital supplied by Backers.
is the distribution adjustment on a scale of to , which accounts for how evenly distributed the Backers are. is closer to when the distribution is skewed and closer to when the Backers are more equally distributed. This ensures no single Backer has an outsized influence. The formula for uses the percent supplied by each Backer, , and is based on the Herfindahl-Hirschman Index:
L is the leverage ratio on a scale of to the maximum potential leverage ratio. Based on the number of Backers, , the leverage ratio increases linearly from , the minimum number of Backers necessary for leverage, to , the maximum number of Backers necessary to achieve the maximum potential leverage, :
What triggers a Borrower Pool to enter default status, and the process that follows.
All parameters for the default process are defined in the off-chain legal agreements established per Borrower Pool, in addition to being defined in the Pool’s smart contract.
Borrowers provide performance reporting (e.g. covenant compliance, asset quality performance) directly to their Investors via the Borrower Communication tooling, which also allows Investors to engage directly with Borrowers throughout any default process that may take place.
Borrowers make monthly interest payments to their Pools to service their debt, as defined in the Pool terms.
When a Borrower misses an interest payment date, defined by their off-chain agreement, or breaks any other provision in their off-chain agreement:
Off-chain: Borrower enters a 3-7 (exact dates vary by pool according to what investors negotiated for) grace period to remediate the missed payment, or broken provision.
On-chain: Borrower enters a 45 day grace period before the protocol marks the loan on-chain as being in default, and starts provisioning the loan.
After 45 days of non-payment, the loan officially enters default status on-chain.
The Pool is now subject to its default interest rate as defined in the Pool terms:
For Senior Pool investors, the value of the loan will on a daily linear basis, be automatically written down over 120 days. If repayments are eventually made, then the writedown will be reversed accordingly.
For Backers in a given pool, no writedown mechanics are necessary since there is already a defined waterfall and pro rata distribution.
Investors work with the Borrower via Borrower Communication channels or off-chain methods to identify the conditions leading to the default, remediate and agree to a repayment plan, and establish transparent solutions to move forward with future repayments.
Any partial payments to the Pool are distributed first to the Senior Pool (senior tranche debt) and then to Backers (junior tranche debt).
If the remediation process is not successful, Goldfinch Investors will be able to pursue off-chain legal recourse via any on and off-chain overcollateralization the Borrower had provided in order to recoup losses.
Currently, all Pools on Goldfinch are fully collateralized with off-chain assets.
As outlined in GIP-25, LPs must now submit a Withdrawal Request to withdraw FIDU from the Senior Pool. There is a 0.5% withdrawal fee for redeeming FIDU for USDC.
A single Withdrawal Request may be fulfilled over multiple distribution periods.
Distributions happen every 2 weeks, and distribution amounts are variable based on availability of capital in the Senior Pool and total amount requested.
A Withdrawal Request remains active until it is completely fulfilled or canceled. Once a Withdrawal Request has been made, it can only be increased or canceled, not reduced.
If a Request is canceled before it is fully fulfilled, the LP is charged a cancellation fee of 1% of the total request.
At any time, Senior Pool Liquidity Providers with a Unique Identity NFT (UID) may submit a request to withdraw USDC from the Senior Pool by depositing their FIDU into a Withdrawal Request. .There is a 0.5% withdrawal fee for redeeming FIDU for USDC on Goldfinch, contributing funding to the Goldfinch treasury.
FIDU that is staked or supplied to a Membership Vault must be unstaked or removed from the Vault before an LP can submit a request to withdraw it from the Senior Pool.
Various Goldfinch community members and third-parties have taken steps to create additional mechanisms to withdraw capital from the Senior Pool when there is no excess USDC due to high utilization rates. For example, two community members created a withdrawal mechanism via a FIDU-USDC Curve pool.*
Withdrawal Requests are fulfilled every two weeks. If there is enough USDC unutilized in the Pool to honor all outstanding withdrawal requests at the end of the distribution period, all withdrawers will receive 100% of the value of the FIDU they requested to withdraw, in USDC.
If there is not enough USDC in the Senior Pool to honor all outstanding Withdrawal Requests at the end of the period, due to the USDC being actively utilized by Borrowers, all available USDC will be allocated to withdrawers pro-rata.
For example, if there is enough USDC in the Senior Pool at the end of the period to fulfill 80% of the current Withdrawal Requests, all withdrawers will receive 80% of the value of the FIDU they’ve requested to withdraw.
Withdraw Requests that are partially filled will be automatically rolled over into the next period, and one’s Withdrawal Request remains active until it is completely fulfilled or canceled. An LP can only have one active Request at a time, although they can increase that request while it is active.
Once a Withdrawal Request has been made, it can only be increased or canceled, not reduced. If a Request is canceled before it is fully fulfilled, the LP is charged a cancellation fee of 1% of the total remaining request.
Will I be able to participate in staking rewards while my FIDU is in the Withdrawal Request?
No, staked FIDU must be unstaked before it can be deposited to a Withdrawal Request.
Any staked FIDU that is supplied to a Membership Vault must be withdrawn from the Membership Vault before it can be un-staked. Then, it must be un-staked before it can be deposited to a Withdrawal Request.
As such, neither staking rewards nor Member Rewards can be earned while FIDU is in the Withdrawal Request.
Will I earn interest from the Senior Pool while I’m withdrawing?
Yes, FIDU that is in an active Withdrawal Request, including both new Requests and rollover Request balances, will continue to appreciate in value while it is pending withdrawal. LPs will still benefit from interest payments that the Senior Pool receives.
However, USDC that has been distributed to an LP at the end of a withdrawal period, but that the LP has not yet withdrawn from the dapp, will not accrue any further interest.
Why not a queue?
In a withdraw queue system, if a large FIDU holder submitted a large withdraw request they could reserve 100% of the incoming capital to the Senior Pool until their request was completely filled. This would prevent other FIDU holders from withdrawing any amount of their position.
How will this solution affect bots?
Speed of withdrawal will no longer be an advantage for withdrawing capital from the Senior Pool. Bots will need to submit a Withdrawal Request to withdraw, like any other LP.
Backers with a Unique Identity NFT (UID) may withdraw interest payments as they are paid by the Borrower, which is monthly across all Goldfinch Borrower Pools as of August 2022. Principal liquidity is dependent on the Pool term as proposed by the Borrower, currently three years on average as of August 2022.
There is no withdrawal fee for claiming a Backer’s share of a Pool’s interest repayments or principal.
The Goldfinch dapp does not directly support PoolToken NFT secondary sales. However, community members and third-parties have launched various integrations via governance to provide Backers with the ability to sell their PoolToken NFTs. For example, AlloyX launched a Goldfinch integration, and the Goldfinch community is launching a community-driven PoolToken NFT market that will allow backers to sell their PoolToken NFTs.*
*Please note that neither the FIDU-USDC Curve Pool, PoolToken NFT market, integrations, nor any other marketplace outside the Goldfinch dapp, are built and maintained by Goldfinch. Therefore, you should use your own judgment before selling FIDU or Backer PoolToken NFTs outside of the Goldfinch dapp.
Auditors — Participants who vote to approve Borrowers based on on- and off-chain evaluation, a required step before they can borrow. Auditors receive GFI rewards for securing the protocol with a human eye.
Backers — Investors who supply capital to individual Borrower Pools. Backers evaluate individual deals and lend directly to specific Borrower Pools via the junior tranche (first-loss).
Borrowers — Participants who raise capital from the protocol via Borrower Pools.
Investors — Participants who supply crypto capital to the Goldfinch protocol, either as a Backer or as a Liquidity Provider.
Liquidity Providers — Investors who supply capital to Goldfinch by depositing in the Senior Pool. This Senior Pool capital is automatically allocated across Borrower Pools via the senior tranches (second-loss) according to the Leverage Model.
Members — Participants who supply capital and GFI to a Goldfinch Membership Vault to support the network's growth and security, and receive Member Rewards for their enhanced participation.
Borrower Pool — Investment pools for specific Borrower deals. A Borrower Pool is a smart contract that encodes a set of financing terms for a Borrower, including the interest rate and repayment schedule, proposed by the Borrower, and through which the Borrower can borrow capital and repay it by those terms.
FIDU — A token that represents a Liquidity Provider’s deposit to the Senior Pool. When a Liquidity Provider supplies to the Senior Pool, they receive an equivalent amount of FIDU. FIDU can be redeemed for USDC in the Goldfinch dapp at an exchange rate based on the net asset value of the Senior Pool, minus a 0.5% withdrawal fee, a rate which increases over time as interest payments are made back to the Senior Pool. FIDU follows the ERC20 standard.
GFI — Goldfinch’s core native token, used for governance votes, Auditor staking, Auditor vote rewards, staking on Backers, and protocol incentives. GFI follows the ERC20 standard.
Governance — Smart contract that is managed by the community DAO and has the ability to update the protocol via decentralized governance votes.
Junior Tranche — The junior (first-loss) capital segment of the Borrower Pool smart contract, funded by individual Backers.
Leverage Model — A formula by which the Senior Pool automatically determines how much capital to allocate to the senior tranche of each Borrower Pool.
Membership Vault — A vault for locking capital to help secure the growth and security of the Goldfinch network as a Member, earning a share of the protocol's fee revenue for doing so in the form of Member Rewards.
Senior Pool — An investment pool for automatically diversified yields. The Senior Pool is a smart contract that accepts capital from Liquidity Providers and automatically allocates capital to the senior tranches of Borrower Pools, according to Goldfinch's Leverage Model.
Senior Tranche — The senior (second-loss) capital segment of the Borrower Pool smart contract, funded by the Senior Pool according to the Leverage Model.
Backer Bonus — The additional $GFI return earned uniquely by Backers, in exchange for taking on the risk of providing the protocol's junior capital as well as for their work evaluating Borrower Pool deals. The Backer Bonus is generated by the Pool's interest repayments.
Curve LP Rewards — GFI rewards for staking Curve FIDU-USDC LP tokens on the Goldfinch protocol.
Early Backer Airdrop — A GFI reward provided to Backers who contributed to a Pool before the implementation of the community governance proposals for Backer Rewards and Backer Staking Rewards mechanisms.
Investor Rewards — The additional GFI return all Investors on Goldfinch receive in exchange for their participation in the protocol. Investor Rewards are an estimated return as they are not defined by Borrowers' financing terms, but are instead dependent on tokenomics and network dynamics.
Member Rewards — Goldfinch Members receive yield enhancements via Member Rewards, which have been earmarked from the Goldfinch treasury and are distributed pro-rata based on one’s Membership Vault position.
USDC APY — The base-level USDC return an Investor receives for participating in Goldfinch, generated from Borrowers' interest payments on their loans. The USDC APY is defined in the Borrowers' financing terms when they establish Borrower Pools. For Backers, this APY is a fixed rate as defined by the Borrower Pool's terms and the Senior Pool leverage. For Liquidity Providers, this rate is estimated as the Senior Pool's USDC returns vary based on the Senior Pool's usage and balance.
There are currently two types of staking accessible on the Goldfinch protocol. All staking and participation incentives are driven and established via Goldfinch’s community governance process. Staking can be accessed in the Goldfinch protocol application at app.goldfinch.finance/stake.
Following a successful community governance proposal, Liquidity Provider (LP) positions from participation in the Curve FIDU-USDC Pool can be staked on Goldfinch to receive additional GFI liquidity mining rewards.
GFI rewards for staking Curve LP positions come from the existing distribution parameters of the Senior Pool Liquidity Mining program, including being subject to the same unlock schedule as well.
Participants can deposit their unstaked FIDU or USDC into the Curve FIDU-USDC liquidity pool by visiting the Stake tab on the Goldfinch protocol platform, and selecting either Deposit FIDU or Deposit USDC under LP on Curve. In the same interface, a participant can select the check box to simultaneously stake their resulting Curve LP positions on the Goldfinch platform in order to receive GFI rewards for their participation.
In addition, those participating in Senior Pool Liquidity Mining by staking FIDU on Goldfinch can also deposit their staked FIDU into the Curve FIDU-USDC liquidity pool via the Goldfinch protocol platform, to earn additional LP rewards without needing to unstake from Goldfinch. Participants can migrate their staked FIDU to deposit into the Curve FIDU-USDC pool by visiting the Stake tab in the platform, and selecting FIDU, then Migrate, under Stake on Goldfinch.
As of January 11 2021, the distribution rate parameters have been set as follows:
Target balance: $100M
Minimum rate: 0 GFI
Maximum rate: 0.5% of GFI supply per month (this equals 0.217438574961948 GFI / second)
Target range: $50M to $200M (50% to 200%)
Governance can always decide to change these parameters.
To encourage long-term participation, the GFI distributions received from liquidity mining unlock linearly over the first 12 months of staking. This means that while you can withdraw whenever you like, if you withdraw before 12 months, you will forfeit some of your GFI distributions. For example, after 3 months you'd forfeit 75%, after 6 months you'd forfeit 50%, and so on. After 12 months, you will continue to receive distributions, and will never forfeit any GFI. See below for more details.
You can read Goldfinch’s documentation on Senior Pool Liquidity Mining to learn more about the Senior Pool Liquidity Mining’s GFI distribution rate, parameters, and unlock schedule, which are the same parameters used for Staking FIDU-USDC Curve LP Positions.
Implementing the community governance proposal to allow staking FIDU-USDC Curve LP positions for GFI involved augmenting Goldfinch’s StakingRewards contract to accept FIDU-USDC Curve LP tokens and calculate rewards based on the user’s Curve LP position.
The modifications of the StakingRewards
contract could enable other types of staked positions on the protocol in the future, should the community pass further proposals to do so. Currently, the StakingRewards
contract only supports staking FIDU directly, and as such the contract calculates individual rewards based on the amount of FIDU staked. In order to support any potential future community desire for staking tokens in the future, an additional calculation is performed at the time of staking to get the exchange rate used to convert Curve LP tokens to an effective FIDU amount. The exchange rate for a Curve LP position will be calculated using the virtual price of the LP token given by Curve.
Note: The Goldfinch protocol uses Curve’s virtual price to calculate the effective FIDU amount instead of spot prices or live ratios of the FIDU-USDC Curve pool to prevent flash loan attacks.
Participants can earn GFI by staking the FIDU received from supplying capital (USDC) to the Senior Pool. Read our documentation on Senior Pool Liquidity Mining to learn more about the Senior Pool Liquidity Mining’s GFI distribution rate, parameters, and unlock schedule.
Participants can stake their FIDU for GFI by visiting the Stake tab in the platform, and selecting FIDU under Stake on Goldfinch.
Using the Goldfinch protocol application, staked FIDU can also be deposited in the Curve FIDU-USDC pool to earn additional LP rewards without needing to unstake from Goldfinch. To learn more about the community-driven incentives for staking FIDU-USDC Curve LP positions on Goldfinch, read the Staking FIDU-USDC Curve LP Positions section above.
Participants can migrate their staked FIDU to deposit into the Curve FIDU-USDC pool by visiting the Stake tab in the platform, and selecting FIDU, then Migrate, under Stake on Goldfinch.
To ensure that Backers, who do not receive FIDU in exchange for providing capital to Borrower Pools, are compensated fairly for their participation in the protocol, Backer Staking Rewards are GFI rewards earned by Backers equivalent to the APY from GFI earned by liquidity providers who supply to the Senior Pool and stake their FIDU. Read our documentation on Backer Incentives to learn more about how Backers receive GFI rewards.