General FAQs
Goldfinch provides tools to help participants interact with the protocol, but it is your responsibility to stay compliant with all legal, regulatory, and tax laws for your relevant jurisdiction(s). All protocol participants are strongly encouraged to consult with their own legal and tax counsel.
What sort of deals can the Goldfinch protocol be used for?
Almost any kind of credit-related investment, into a real-world venture providing some sort of productive service. The Goldfinch protocol is a marketplace, where capital is aggregated for various use cases as it relates to lending. The transaction sponsor (e.g. borrower, or lead backer) owns presenting an opportunity to the community (e.g. principal investment into a corporate, credit fund co-investment, credit fund sub-participation etc...), with the community, ultimately deciding whether or not to fund the opportunity.
What type of structured facility can the Goldfinch protocol provide?
The protocol provides a uni-tranche facility, whereby a single credit line is made available, at a single coupon. There is no ability to only raise junior, or senior capital through the Goldfinch protocol.
Is the Goldfinch protocol making a loan to the Lead Backer, or is the protocol participating directly alongside the Lead Backer in its credit facility investments as any other co-investor would do?
Following on from answer #1., the protocol can invest in either opportunity.
Is the pool investing in individual transactions or in a vehicle that aggregates multiple transactions?
Following on from answer #1., a Lead Backer fund could present an opportunity for the Goldfinch protocol community to invest in a fund (acceptable forms for how the fund should be structure is for the community to determine)
Would either the Lead Backer, or the Lead Backers counterparty be required to make the Goldfinch pool whole?
Similar to a real-world fiat-based lending agreement, the obligor(s) (i.e., who the protocol is lending to) must make the Goldfinch protocol investors whole as a result of any form of nonpayment, whether driven by credit or market risk (e.g. FX) factors.
Is Goldfinch team I am interacting with running a fund?
Protocol Mechanics
No, the Goldfinch team operates a foundation and is not the investor. The Goldfinch protocol is purely a smart contract, which defines how capital can be supplied and repaid.
How can I assess whether the Smart Contract which governs how capital moves works?
Protocol Mechanics
The smart contract code is freely accessible and can be found in Github. The Goldfinch smart contract has additionally been audited by 3rd party providers for security flaws by teams like Trail of Bits.
What currency does the Goldfinch protocol supply capital in?
Protocol Mechanics
The protocol as of now only supplies, and can receive capital in USDC, a stablecoin managed by Circle (see this link for details). The protocol may at some point in the future support other stable coins. The protocol cannot supply and was not designed to supply, or be repaid in fiat (i.e. USD)
Does Goldfinch manage / own the stablecoins it supports?
Protocol Mechanics
Goldfinch simply utilizes the stablecoin as the base unit of currency and has no control over the organizations which created the stablecoin (e.g. Circle, Tether etc....)
Is the pool converting USD Coin into fiat in order to make its investment?
Protocol Mechanics
Goldfinch solely supplies capital in USDC, a stablecoin. The party interacting with the protocol owns the responsibly of converting the USDC into fiat (e.g. USD, EUR, MXN etc...)
Does the pool expect to be repaid in fiat or in USD coin?
Protocol Mechanics
The Goldfinch protocol can only supply capital in USDC, and can only receive payments in USDC
How would Lead Backers operationally draw, and repay capital into the Goldfinch protocol?
Protocol Mechanics
The primary participant interacting with the protocol will need to open a Crypto exchange account, with their exchange of choice, who can convert the USDC into their fiat currency of choice. We recommend budgeting 4 weeks to set up a business account at an exchange like Coinbase. See attached diagram for a visualization of the flow of capital.
Where can I learn more about the protocol?
Protocol Mechanics
Read the white paper here
What happens if USD Coin untethers from USD and appreciates versus USD?
Similar to other forms of foreign exchange risk, where some currencies have no liquid hedging mechanism the obligor bears the full risk of USDC untethering from USD. The participating parties, as part of their diligence, should work to understand the underlying risks associated with utilizing USDC. Circle, the sponsor of USDC is working to further mitigate its risk, and has publicly stated its intent to become a regulated US bank.
What sort of checks guardrails exist to ensure the backers who fund transactions aren't known bad actors?
Everyone that goes through the Goldfinch front end, whether acting as a senior pool or junior pool lender, must go through a 3rd party KYC/AML analysis. This work is run by Persona, a trusted third party that runs similar checks for multi-national crypto, and real-world corporates around the globe. See link on right, for full list of checks Persona runs on individuals.
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