Let’s be honest: the past six months have been a bloodbath for the cryptocurrency world.
Macro conditions stopped cooperating, markets plunged, and investors fled risk. Although cryptocurrencies lost value, it’s important to make a key distinction.
Overleveraged players such as Three Arrows Capital and Celsius—whose collapses were part of a contagious spiral that hit the industry—were largely CeFi, meaning centralized financial firms.
Celsius marketed itself like a bank, but in reality it operated more like a high-risk hedge fund. Their investments proved reckless and insolvency followed. Unfortunately, many clients were unaware of how their funds were being used or where returns originated. In short, transparency was lacking.
DeFi
DeFi, by contrast, behaved exactly as designed. Thanks to the transparent technology of blockchain, actions unfolded exactly as coded. Margin calls and liquidations happened on-chain, where any observer could see events in real time.
Celsius, by comparison, sent an email on a Sunday night announcing an abrupt suspension of withdrawals—and the rest is history (or, more accurately, the beginning of a long legal process that could continue for years. Ask Mt. Gox investors for details).
I sat down with the co-founder and CEO of TrustToken, the team behind the TrueFi lending protocol, to discuss these events and more. TrueFi enables unsecured on-chain lending, aiming to maximize capital efficiency for borrowers and returns for lenders.
Yes—you probably noticed the term “collateral-free.” While over-collateralization is common in crypto today, that model is capital-inefficient.
Of course, unsecured lending involves trade-offs around credit risk—should every borrower be treated the same way current DeFi models often do? That’s a nuanced debate we explored with Rafael on the podcast. It’s worth noting that TrueFi originated a billion dollars in loans in its first year without any delinquencies. Today, it still has not experienced insolvency.
We also discussed the bear market (hard to avoid that topic), stablecoins—TrustToken runs a suite of stablecoins including TrueUSD, currently the fifth largest by market capitalization—and the issues surrounding Tether’s reserves, among other subjects.
Spotify link: here
YouTube: here
Get started with TrueFi: https://TrueFi.io
Read the litepaper: https://bit.ly/truefiblog
Follow for updates on Twitter: https://Twitter.com/TrueFiDAO
Join the community on Discord: http://bit.ly/truefichat