TrueFi, a decentralized credit protocol, has unveiled the Trinity protocol, aimed at enhancing the capital efficiency of on-chain real-world assets (RWA). The Trinity protocol will leverage the TRI token, which is backed by collateral assets denominated in dollars, to simplify the process of acquiring leverage and managing risks for users.
The initial collateral asset used to support TRI will be the interest-bearing tfBILL, a tokenized short-term United States Treasury bill product. However, other TrueFi pools, RWA from different protocols, and other crypto-native assets may also be employed.
Users will have the option to mint TRI on the Trinity platform using tfBILL or other assets as collateral and exchange it for a stablecoin on an automated market maker. Through a smart contract called a vessel, users can then mint additional TRI by borrowing up to 92% of the loan-to-value ratio in TRI, swap it back for the stablecoin, and repeat the process. This iterative process has the potential to yield a net return of 15-20%.
Alternatively, users can exchange stablecoin for TRI and stake it in the sTRI vault, earning fees that are expected to match or surpass T-bill rates. TRI can also be traded on secondary markets.
According to TrueFi, the peak of on-chain RWA occurred in April 2022, during which it had outstanding loans totaling hundreds of millions of dollars to trading firms. However, the current market for on-chain credit is only a fraction of its peak level.
The Trinity protocol is currently live on the Optimism Sepolia testnet, and after the completion of an audit, initial users will be selected. The protocol is expected to have a maximum TRI mint cap of $40 million when it officially launches.
TrueFi plans to introduce Trinity on Coinbase’s layer-2 Base network, although it will not be accessible to U.S. users during the initial rollout. This decision is part of a cautious approach to ensure compliance. Base currently boasts approximately 150,000 verified addresses, enabling the verification of non-U.S.-based users and whitelisting of institutions.
TrueFi initially launched its protocol in 2020 and facilitated $1 billion in loans in 2021.