Having a single entity as TrueFi’s sole Credit Risk Manager for Asset-Backed Lending and for expanding the scope of Real-World Assets (RWAs) could be seen as a centralised point of control.
If one organisation is the only gatekeeper for borrower referrals and credit risk management, it centralises authority and decision-making of the borrowers that are on TrueF, which could limit the decentralised nature of the protocol.
In a truly decentralised protocol, responsibilities should be distributed, or credit assessments should involve a network of 2-3 independent participants.
This approach aligns with decentralised values, ensuring that no single entity has disproportionate control over the credit risk management processes.
Balancing efficiency with decentralisation is crucial, ensuring transparency and trust while avoiding bottlenecks or single points of failure.
Additionally, relying solely on one entity for these critical roles misses out on the competitive edge that having multiple Credit Risk Managers would provide. Competition among various managers can drive better performance, more rigorous evaluations, and a healthier, more decentralised protocol.
Adding more than one Credit Risk Manager would also enhance the respect and credibility of conversations around credit risk, as it would involve diverse perspectives and expertise.
Each risk manager would also be part of the DAO, providing feedback on borrowers referred by themselves and others. This collaborative approach would enhance transparency and accountability within the DAO, allowing us to measure and compare the performance of each manager.
If TrueFi were to rely solely on one entity, it would be essential to present each borrower referred by the Credit Risk Manager to the DAO for a three-day discussion. This process would allow the community to review, debate, and provide input, ensuring that decentralised governance remains robust and effective.
Additionally, it would serve as a quality control measure, helping to maintain high standards for the single Credit Risk Manager and the borrowers they bring to the protocol.
Whatever the outcome of the TFIP-18 and TFIP-20 votes, we should consider these principles moving forward.
We could also consider the following;
TrueFi to create simple Lender, Borrower, Partner forms on TrueFi.io and have a checkbox agreement
See a basic example of the forms here at Credora, minus additions discussed below.
For Borrowers
I acknowledge that the information submitted in this form will be shared with TrueFi’s Credit Risk Managers of my choosing within this form.
Alternatively, if it’s a single Credit Risk Manager, Borrowers must be referred through this form channel by single Credit Risk Manager as Step 1, and the information is then passed on to the single Credit Risk Manager automatically via email forwarding.
Basic data collection for TrueFi is imperative moving forward
If we do ever go down the path of having more than a single Credit Risk Manager.
Borrowers who dont come through a referral could also have a drop down on the form;
Select your Credit Risk Manager⬇️
No preference
Credit Risk Manager 1
Credit Risk Manager 2
Credit Risk Manager 3
Additional Step
When borrowers are directed to the form by a specific Risk Manager, an additional step could be to include a unique referral code provided to the borrower by one of the three onboarded Risk Managers;
Add your Risk Manager referral code:
This could be used to track performance and contribute to “performance bonuses” data.
No code entered by borrower, no contribution to performance bonuses
This can be done with 1 or 3 credit risk managers.