[Proposal] TrueFi Loan Approval and Rate Setting

To date, TRU stakers have voted on each individual loan application, often without much information regarding the borrower beyond reputation. This model has been great for getting off the ground but now requires the first step of automation to be scalable and risk-adjusted.

To that end, we are asking TRU holders to vote on a new TrueFi Rate Model, which will allow for far more efficiency in working with our borrowers and provide clarity on approvals, loan amounts and interest rates. To determine these parameters, the TrueFi Rate Model incorporates data points including lending pool size, current utilization, loan size, borrower assets, and credit score.

Voting on the TrueFi Rate Model reflects your view of the first version of this model and the inputs that drive the analysis including but not limited to the lending pool “Maximum Utilization Ratio %” and our base interest rate “Unsecured Risk Premium”. We expect and acknowledge that the model inputs will continue to be adjusted via subsequent vote as we mature and encounter nuanced borrower profiles.

Ultimately, we expect to have different models and parameters for different lending pools to accommodate varying borrower and lender needs. The TrueFi Rate Model will initially be applied equally across the TUSD, USDC and forthcoming USDT pool.

For now, the TrueFi team will continue to perform compliance including KYC, manage loan agreements, and compute credit scores for prospective borrowers thus ensuring the integrity of the inputs to the model. Over the long term we look forward to decentralizing these aspects of the protocol as well.

We welcome any feedback and encourage you to vote. We believe the TrueFi Rate Model will allow us to deploy loans faster, achieve higher lending pool utilization and build borrower credit history more efficiently within our protocol.


  • Yes, implement the TrueFi Rate Model.
  • No, the status quo is preferred.

0 voters


Thanks for posting this @RDharia. I’m voting in favor as I believe this represents a very significant improvement to the protocol. I expect this will allow us to deploy capital much faster while also being more systematic with how we’re managing risk. This is an important part of maturing as a lending protocol.

1 Like

This is an integral part of upgrading TrueFi, and has my enthusiastic vote YES. Of course I think the model may need updates down the line, but here are the benefits - as I see them - of approving this proposal:

  • Automated terms dramatically improve the borrower experience by speeding up time to loan, while also opening up the black box of how a rate is generated for a greater sense of transparency.
  • This is likely to create more loan activity (IMO) which will raise rates for lenders and increase utilization.
  • It gives the credit model practical impact on rates, which makes the credit model itself more valuable and thus more likely to succeed across DeFi.
  • It opens the door to dynamically adjusted lines of credit, which is when money truly flows as freely as water & achieves ever-higher rates of efficiency.

tl;dr = elegant and necessary.

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Its a good model.

It would also be useful if we had guidance on how credit scores are being calculated and what expected default rate is at different scores. If we are relying on wisdom of the crowds for which loans to accept, then people need as much information about risks as client privacy allows.

This is a non-brainer proposal, reflected by the 100% upvote rate. This is the way.

Insights on what elements factor into the credit score are available in the V3 blog post and the linked Tweet below:

Long: https://blog.trusttoken.com/truefi-v3-credit-model-new-asset-support-a7cf73a37270

Short: https://twitter.com/TrustToken/status/1395749231613337603?s=19

1 Like

Hello all,

I was redirected here from the discord chat.

One question that I have: is the legal jurisdiction of the borrower considered when making a loan? Is that information verified?

At some point, defaults will start to happen, and that’s when we’ll see if the project has long term value. Will the legal recourse be effective? I’m just wondering how the system is set up and if it’s capable of launching procedures against entities anywhere in the world, or only in some countries.

Also, if we’re lending to crypto firms, a lot of their assets will be in crypto. Do we ensure that it’s all on the books and in the name of the entity that is receiving the loan?

Lastly, do we check that the people we’re loaning to aren’t involved in terrorism/ money laundering… Just thinking that reputational damage never helps these types of projects…


Thanks for your questions McQ-1993. I can probably handle most of the legal questions. @RDharia can address the types of assets our borrowers represent to us as they onboard.

Yes, the legal jurisdiction of the borrower is considered prior to issuing a loan. It is done as part of onboarding the borrower. If borrowers are incorporated in certain risky legal jurisdictions, based on factors such as ease of service of process and participation in international arbitration agreements, the borrower is not given access to the platform. Currently, the TrueFi team is performing this screening so these types of risky borrowers never even make a public loan application. In the future, as more parts of the platform are turned over to Community control, TrueFi holders could vote to allow borrowers from other legal jurisdictions to onboard. The borrower screening process also takes into account if the borrower has appointed an agent for service, and rewards borrowers for doing so.

Another safety measure that is built into the current process is the Master Loan Agreement that each borrower signs. Again, prior to being able to submit a loan request, each borrower signs the MLA by which they submit to arbitrate any dispute under the TrueFi’s choice of law, rather than require legal action in multiple different jurisdictions. In the next two fiscal quarters, the team plans to move the Loan Agreement to the public blockchain for even more transparency.

Finally, with regard to money laundering, every borrower on the TrueFi platform must undergo a full anti-money laundering (AML) and know-your-customer (in this case Know Your Business) review before being onboarded. That review is done by the same licensed Money Services Business team that onboard participants that use TUSD. Just as with TUSD, if a business can’t pass the AML/KYB review they can’t create an account and could never even create an account that would allow them to make a loan request.

Please let me know if this answers your legal questions.

Hi McQ-1993-- Tim did a great job with his response but I’ll just add that yes the borrowers are required to provide supporting evidence of the total trading capital $ they have claimed in their attestation.