Review Of The Popular Cryptocurrency TrueFi (TRU)
In just a year, the DeFi sector has grown to incredible proportions and continues to grow at the rate of inflation of the Venezuelan bolivar, becoming overgrown with new platforms and protocols. One of these is the TrueFi decentralized lending platform, which, admittedly, managed to stand out from all competitors with its original approach to loans. But how exactly? It’s a long story.
What is TrueFi?
TrueFi is a DeFi platform that provides decentralized (direct) lending services using the like-named native TrueFi token and the project specific TUSD stablecoin. This scheme works as follows:
- The user purchases TRU tokens and issues a stablecoin to become a lender
- The lender places the tokens in the TrueFi lending pool
- The lendee creates an offer with the conditions for obtaining a loan (interest, maturity, amount)
- Smart contract accepts or rejects this offer
- If accepted, the offer is executed and the lendee receives a loan.
The lender’s remuneration is made up of the annual interest rate on funds frozen in the pool (the average interest at which lendees are willing to take out a loan) as well as payments from the Curve pool, where TrueFi transfers all unused stables. The lending pool currently has the following interest rate and size:
As you can see, this scheme lacks an important component – the collateral. Unlike other decentralized lending platforms, TrueFi offers unsecured loans, which can be obtained without freezing cryptocurrency as collateral.
The native TrueFi token (TRU) is the basis of the platform’s tokenomics and performs a number of important functions:
- Provides a voting right in community decision-making
- Gives the right to approve or reject the lendee’s offer
- Allows issuing TUSD stablecoins for granting loans.
Since the platform is deployed on Ethereum, TrueFi is technically an ERC-20 token and can be stored on all compatible wallets. The developers left 39% of the 1,444,746,288 tokens of the maximum supply for mining purposes. The rest were allocated to private sale, the team and other essential needs:
As a result, TrueFi is a utility token with a fixed supply and a dynamic rate, the value of which directly depends on the demand for platform services.
Another “wheel” of this lending cart is TUSD, the dollar-pegged stablecoin that is used on the TustTokens stablecoin platform, which is associated with TrueFi. TUSD enables users to receive a loan in a predictable and stable currency and pay equally predictable interest upon repayment. Just like in a regular bank.
TUSD positions itself as a trustworthy and transparent stablecoin, but it clearly does not claim to revolutionize DeFi – its transparency is ensured by the fact that the platform allows issuing tokens only after the fiat collateral is transferred to a reliable depository cooperating with TustTokens.
Since TrueFi offers unsecured loans, a logical question arises – how to guarantee the discharge of the debtor’s repayment obligation? On the platforms like Compound, the main safeguarding mechanism is cryptocurrency collateral, which can be several times the size of loan. TrueFi has given up on this “safeguard”, with two other enforcement mechanisms are used:
- Legal. When taking out a loan, the lendee actually enters into a loan agreement, where TrueFi can file a lawsuit in case of default by the lendee to discharge its repayment obligation. At least that’s exactly what the official website says. Given that the company has offices in various countries all over the world and lendees are subject to verification (at least at the initial stage of the platform’s development), that outcome is quite probable.
- Reputational. The decision to accept or reject a loan offer is made by a smart contract based on a TRU holders’ voting. The LoanTokens protocol has been specially developed for this purpose. Simply put, each TRU token holder can vote for or against granting a loan to a specific user. In addition, the system evaluates other risk factors, including the user’s account balance and reputation. As of this writing, only two out of 8 loan offers were rejected on TrueFi:
The debtor is obliged to repay the loan and the agreed interest on time. Failure to do so brings down the debtor’s credit trust rating and thus a chance to receive another loan.
All this combined should provide a stable and secure direct lending mechanism without the added complexity of cryptocurrency collateral. TrueFi is a true pioneer on that score – all existing DeFi platforms offer secured loans.
Background & Team
The TrueFi project was founded by Rafael Cosman, with the full startup team composed of several dozen people – no-name hipster programmers with MacBooks. The team has successfully created a TrustToken stablecoin platform and launched two stables on its basis – TUSD and TGBP. On the website, this dream team looks so cute:
According to developers, they were inspired to create TrueFi by the understanding that it is the technologies that connect conventional markets and cryptocurrency that are the most interesting and productive.
The platform with the native TRU token was announced back in 2020, but the lending service was fully operational only toward the end of the year – from November 2020. Now the developers see several lines of the platform development:
- Decentralization. TRU holders’ current role in the platform’s life is more limited than in some DeFi, which is explained by “juvenility” of TrueFi. However, the developers plan to gradually cede control over the platform to the community, entrusting it with important decision-making (including fund control).
- Asset expansion. At this point in time, loans can only be received in TUSD, but plans call for adding other stablecoins in the near future. Probably, the next loan will be granted in TGBP that is currently operational on TrustToken.
- New services. What is meant here are primarily new types of loans, so it is possible that TrueFi will be offering secured loans or even a fundamentally new lending format.
For this reason, 2021 may be marked by loans granted in new stablecoins or even in unstable cryptocurrencies, or even integrations with other DeFi platforms in order to increase farming efficiency and develop new areas of focus in this sector.
TrueFi (TRU) is a native token of the decentralized finance protocol deployed on the Ethereum blockchain that is mined in the traditional way for such platforms – using staking and farming.
So, in order to get new TRUs, you first need to purchase tokens on the platform or exchange and stake them on TrueFi. A reward that is based on the amount of stake will be distributed among token holders on a regular basis. The current staking statistics looks as follows:
Frozen TRUs also give the right to vote for or against a loan granting and issue stablecoins required to grant a loan.
Pros and Cons of the Project
TrueFi is a “green” platform that has been operating for less than six months and its main strengths and weaknesses are yet to be assessed. Nevertheless, the platform’s fundamental idea – unsecured lending – has pronounced pros and cons in the ecosystem of decentralized finance. Below are the project’s main advantages:
- No collateral. For people experiencing liquidity problems, 1.5 times (or even more) the amount of collateral against the loan amount is usually an insurmountable barrier, and unsecured loans can eliminate this barrier.
- Low fees. TrueFi charges only 0.25% of the loan amount from the lendee. These funds are directed to the platform fund, the control of which should be ceded to the community in the near future. Moreover, TrueFi loan interest ranges from 11.5% to 16%, which is lower than most banks can offer.
- Combined income. TrueFi members and holders can not only earn on the interest received from lending, but also concurrently participate in staking and provide liquidity in the TUSD pool for consideration.
- New safeguarding system. Not a single DeFi platform has yet practiced credit trust rating setting by the very participants. As reflected by the absence of statistics on outstanding loans on the official website, this innovation is working effectively so far, but it is not clear how the situation will unfold with the growing popularity of the platform.
Nevertheless, the project still has some weaknesses:
- Increased risks for the lender. The lack of collateral prevents the lender from immediate return of their funds in case of default of obligations or repudiation on the part of the lendee. Lawsuits do not guarantee the favorable outcome when interacting with lendees from all over the world.
- Limited assets. Dollar loans are not the best solution for everyone, even though they are granted in transparent stablecoins. There is a clear need for assets pegged to other fiat currencies, and ideally, for cryptocurrency lending pools.
- Almost complete lack of integrations. The only known interaction is Curve, the pool of which should receive unused stablecoins from TrueFi. However, like platforms have a huge potential for interaction with market makers, DEX, investment protocols like Yearn.Finance.
This suggests that although unsecured loans may appear to be popular among market players, their potential has not yet been unleashed due to platform’s “juvenility” and relatively low popularity. In addition, the safeguarding mechanism based on the participants’ votes has yet to be fully tested.
TRU Price Prediction
As of this writing, TrueFi is worth $0.3 after a sweeping drop in price. A semi-annual scale clearly shows that the coin follows general market trends:
The dependence on the general market sentiment is explained by the relatively small capitalization (just over 75 million) and low popularity of the platform. However, the token rate also depends on the state of the TrueFi platform and the demand for the services offered, which remains quite low due to the above disadvantages.
TrueFi needs a developed and sound ecosystem that would further simplify the use of received loans and expand the functional and economic value of TRU tokens. Solving this problem will make TrueFi a promising investment, because only the owners of these coins will be able to determine the vector of the platform’s development and will have access to several earning tools, including farming and liquidity mining.
TrueFi is a new DeFi protocol with a traditional structure based on the like-named native token and the original idea of unsecured loans. The project is backed by a strong team that is responsible for launching a platform for creating stablecoins and even supporting the operation of several stablecoins. Given its short term of operation (less than six months), TrueFi can be called a promising and far reaching solution in the field of decentralized lending.
Moreover, the platform offers a new mechanism for safeguarding against debtors’ default, which has yet to be tested, even though it shows high efficiency at the current stage of TrueFi’s existence. Probable, this is the main reason for lenders’ low interest in using the platform.
However, TrueFi token holders can earn simultaneously on:
- Loan interest
- Liquidity mining.
All this combined can yield a high annual return, which will be enhanced by increase in the TRU token rate. That is why purchasing these coins is likely to be a good investment, provided that the developers continue to develop TrueFi’s functionality and ecosystem.