Meet TrueFi’s Lending Products

Introducing TrueFi’s primary lending solutions: Permissionless Pools, Single Borrower Pools, Automated Lines of Credit (ALOCs), and Portfolios

At its Web3 debut on November 2020, TrueFi completed DeFi’s first uncollateralized loan with funding from TrueFi’s permissionless pools in the form of a simple bullet loan. Since then, TrueFi’s full suite of lending solutions has grown to four distinct solutions, now serving over a dozen active and distinct lending opportunities.

In this post, we’ll cover the four primary designs available to facilitate lending and borrowing on TrueFi today, and also explore upcoming products and upgrades we expect will help TrueFi break further into the +$8 trillion global credit market.

Read on for an introduction to TrueFi’s primary lending products:

• DAO Pools
• Single Borrower Pools
• Automated Lines of Credit (ALOCs)
• Portfolios

Want to see our lending products in action? Head over to TrueFi now to explore the full array of crypto-native and real world lending opportunities available on our protocol.

Interested in becoming a borrower or bringing your lending book on-chain as a portfolio manager? Apply to get started today.

🪣 DAO Pools

DAO Pools aggregate lender capital in a permissionless fashion, then allocate it towards the most creditworthy, DAO-approved crypto-native borrowers such as Alameda, Wintermute, and Nibbio. Borrowers go through rigorous vetting by both a Credit Committee and TRU holders, which sets and updates each borrower’s loan terms, size, and rates based on the health of their business and the state of the market.

To date, DAO Pools have originated over $1.5 billion in loans to over 30 institutional borrowers across more than 100 loans since November 2020. The DAO pools are called as such because they are owned and overseen by the TrueFi DAO, following a binding on-chain vote.

DAO Pools enable uncollateralized lending through the interaction of three stakeholders: Lenders, Borrowers, and Stakers.

• Lenders: Lenders earn yield by lending stablecoins (currently supporting TUSD, USDC, USDT, and BUSD) to DAO Pools. Lenders receive TrueFi lending pool tokens (tfTokens), representing their proportional claim to the principal and interest generated by their capital in the lending pool. Yields have historically exceeded 10% APY, and at periods of high demand, have even approached 20% APY (with TRU incentives) in certain pools.
• Borrowers: Currently, TrueFi allows institutional borrowers with at least $10 million in net unencumbered assets to borrow on the TrueFi platform. Notable vetted borrowers include Alameda Research, Nibbio, and Wintermute. Borrowers must go through an onboarding journey to verify their creditworthiness (using on-chain and off-chain information) and be whitelisted to borrow through a community vote.
• Stakers: Stakers of TRU act as a vetting and risk management system for the TrueFi DAO Pools. TRU Stakers approve new borrowers, vet loan requests, and participate in the design and utilization of DAO Pools. In return, receive rewards in the form of incentive TRU tokens, but are also subject to partial slashing risk in case of a loan default on a loan TRU stakers approved.

Who can lend to DAO Pools: TrueFi’s permissionless DAO Pools are open to any lenders, in any amount, anywhere around the globe — excepting sanctioned countries and persons. Rates are competitive for lenders, between 8–18% APY after TRU incentives.

Mitigating risk: To date, DAO Pools have faced zero defaults, and benefit from partial loss coverage from staked TRU and the TrueFi SAFU, each designed to lower the impact of default on lenders. DAO pools are the only lending opportunities that benefit from this additional assurance. Furthermore, because risk is spread across many borrowers and multiple pools, lenders are at lower risk from any one default due to adequate diversification. Read more about how TrueFi mitigates risk to DAO Pools here.

How to Exit the TrueFi DAO Pools: Lenders to the DAO pools enjoy a number of exit options in the form of Liquid Exit, which allows lenders to cheaply exit their loan position within the TrueFi app at times of lower utilization, as well as exiting into tfToken pairs available on some DEXs.

How to Lend to a TrueFi DAO Pool

Lenders can lend stablecoins to TrueFi lending pools, which use predefined strategies to lend to creditworthy borrowers. Watch below for a brief tutorial:

🐋 Single Borrower Pools

TrueFi’s most creditworthy institutional borrowers may be whitelisted to launch and manage their own Single Borrower Pools (SBPs) to attract dedicated capital from TrueFi’s network of lenders. SBPs are an extension of TrueFi’s lending pool, with four critical differences:

1. The pools are managed by the borrowers directly, rather than the DAO or Credit Committee. SBP borrowers manage their offered rates, loan terms, and even their selection of lenders.
2. SBP lending is concentrated to a single borrower, rather than diversified across a range of borrowers.
3. SBPs may restrict the types of lenders who are allowed to participate in the pool. For example, certain SBPs may now allow US-based investors to participate, or may require these US investors to be formally accredited.
4. SPBs do not offer exit liquidity before the end of the loan term.

Single Borrower Pools are an ideal option for risk-averse lenders who only want exposure to a single, highly reputable borrower while still wanting to enjoy the benefits of lending through TrueFi. Currently, TrueFi offers a Single Borrower Pool designed for digital asset principal trading firm Alameda Research, with other SBPs under review.

Single Borrower Pools allow for increased control for both lenders and borrowers. Lenders are given a higher sense of security by knowing exactly where their funds are going, while borrowers set the full terms of the pool, and funds are taken out at will.

Compared to Automated Lines of Credit, however, discussed below, SBPs only offer fixed-rate, fixed-term loans, meaning the lender locks up their funds for the term of the loan, and the borrower locks in their interest rate.

📈 Automated Single Lines of Credit

Automated Single Lines of Credits (ALoCs) are a new type of “dynamic” lending pool, designed for a single borrower. While SBPs offer loans for a fixed term, at a fixed rate, ALoCs allow a borrower to access capital at-will (so long as funds are available in the pool), and to only pay interest payments each month (versus repaying the whole principal with interest) until the very end of the line of credit.

In turn for such fluid capital access, borrowers pay a dynamic rate on borrowed capital based on the utilization of the pool: the higher the utilization, the higher the cost of capital, and vice versa. Borrowers define the rate curve and interest is accrued at every block mined on Ethereum.

ALOCs provide borrowers a flexible way to tap on-demand liquidity, while giving lenders a way to deploy capital to a single borrower without giving up their ability to exit the pool. At the same time, because capital is priced based on utilization, it also aligns the interest of the borrower with the interest of the protocol: it is now to the borrower’s advantage to widely market their ALoC to attract more capital to the pool and lower their cost of borrowing.

How do ALOCs Work?

For lenders: ​​Once a portfolio is created, lenders can put funds into the portfolio if they meet the lender restriction requirements. Lenders can withdraw from the portfolio’s idle funds at any time. As lenders enter and exit the portfolio, the utilization of the portfolio changes; thus, the lender APY changes as the interest rate paid by the borrower changes.

For borrowers: A borrower can withdraw idle funds any time before the ALOC’s end date. After the end date, deposit and borrow actions within ALOC are disabled, and the borrower has to repay all the loans.

How are Rates Set?

Generally (but not always), as utilization of the ALoC increases, the interest rate also increases. It’s important to note that interest rates will never exceed the ceiling interest rate chosen by the borrower. As utilization decreases, the interest rate decreases but is never past the borrower’s chosen floor rate. A rate curve is always visible in the TrueFi app for each ALoC, and a new rate is calculated with each dollar that flows in and out of the ALoC.

How are Fees Distributed?

When a lender withdraws, they pay fees to TrueFi protocol treasury, which consists of a protocol fee and an optional premium fee.

The protocol fee is always 50bps. The premium fee can be set by the borrower and also goes to the protocol. For example, a DAO borrower could incentivize TrueFi DAO to deploy their ALOC by increasing the premium fee they choose to pay to the protocol.

📊 Portfolios

TrueFi’s Portfolios are among the most flexible DeFi primitives available in terms of creating a bridge between traditional finance (or “real world assets”) and on-chain lending. Designed for portfolio and fund managers who want to launch financial products on-chain with global reach from day one, TrueFi portfolios offer a broad scope of customization options as well as compelling benefits as compared to traditional fund management.

TrueFi allows portfolio managers to bring nearly any lending opportunity on-chain while taking advantage of the unique benefits of blockchain. Notable benefits include:

• Reduced business overhead: TrueFi opens access to lenders, borrowers, and services, allowing portfolio managers to focus on allocating capital.
• Access to on-chain liquidity: Through Portfolios, asset managers can tap into DeFi’s $150 billion of global liquidity from day one.
• Modern financial rails: By bringing lending books on chain, portfolio managers reap the best of blockchain technology, such as 24/7 operations, a global user reach, industry-leading security, and unparalleled transparency.

Portfolios can be designed in the following ways:

1. In partnership with a crypto-native portfolio manager (such as TrustToken) who oversees the DeFi elements of the portfolio
2. Built and managed by the fund owner themselves, then listed to the TrueFi frontend via community approval
3. By building the portfolio oneself using TrueFi’s smart contract infrastructure and owning all elements of publishing, fundraising, and management alone.

TrueFi Portfolios bring the speed, cost savings, and accessibility of blockchain technology to all types of lending, opening DeFi to the institutional sector while lowering the cost of doing business and growing the total accessible market for traditional funds.

Real-World Lending with TrueFi Portfolios

TrueFi is home to a growing number of lenders using crypto-native funding to create real-world impact. Meet three of TrueFi’s top real-world capital allocators below, or join the list launching your portfolio today.

Delt.ai

Mexico-based Y-Combinator startup Delt.ai was the first non-crypto financial partner to build a Portfolio on TrueFi, in partnership with TrustToken. TrueFi’s B2B Portfolio opened the door for non-crypto businesses to benefit from crypto funding, with delt.ai allocating millions to growing the Latin American fintech sector, while generating competitive returns for TrueFi users.

Teller

Teller Finance and USDC.homes built TrueFi’s first real estate Portfolio, allowing any qualified lender to immediately invest in US real estate on-chain, generating average interest rates of 5–8% and paving the way for a growing crypto mortgage industry.

Cauris Finance

Designed as a mission-driven investment firm, Cauris Finance provides private credit lines to technology companies in the emerging markets, helping scale both financial returns and real-world impact across Africa, Latin America, and Asia. Offering both an avenue for DeFi to make the world a better place, and returns above 8% APY, the Cauris portfolio is open to new qualified investors.

What’s Next?

TrueFi is creating the definitive on-chain capital market and bringing the benefits of DeFi to the real world.

Looking to lend on TrueFi but unsure where to start? Head over to the TrueFi App and see what financial opportunities are right for you, or join the TrueFi Discord and follow TrueFi on Twitter new product and protocol updates.

Interested in borrowing on TrueFi, or launching your own portfolio? Head to TrueFi’s Institutional page and submit an inquiry to get started.