# GIP-35 Untangled \<\> Goldfinch: RWA reporting **URL:** \ **Category:** Proposals\ **Created:** [December 9, 2022, 5:53pm UTC](https://gov.goldfinch.finance/t/gip-35-untangled-goldfinch-rwa-reporting/1334 "2022-12-09T17:53:48Z")\ **Posts on this page:** 7\ **Page:** 1
**Author:** ![MUntangled](https://avatars.discourse-cdn.com/v4/letter/m/977dab/32.png) [@MUntangled](https://gov.goldfinch.finance/u/MUntangled)\ **Post date:** [December 9, 2022, 5:53pm UTC](https://gov.goldfinch.finance/t/gip-35-untangled-goldfinch-rwa-reporting/1334/1 "2022-12-09T17:53:49Z")
- Authors: Manrui Tang, Untangled Finance - Summary: - Motivation: - Specification & Requirements: - Benefits: - Downside: - Voting: - Resources: ---
**Author:** ![parallacs](https://avatars.discourse-cdn.com/v4/letter/p/f6c823/32.png) [@parallacs](https://gov.goldfinch.finance/u/parallacs)\ **Post date:** [December 9, 2022, 6:33pm UTC](https://gov.goldfinch.finance/t/gip-35-untangled-goldfinch-rwa-reporting/1334/2 "2022-12-09T18:33:18Z")
Hey! Can you add _ **GIP-35:** _ at the beginning? ---
**Author:** ![mans9841](https://avatars.discourse-cdn.com/v4/letter/m/35a633/32.png) [@mans9841](https://gov.goldfinch.finance/u/mans9841)\ **Post date:** [December 13, 2022, 1:27pm UTC](https://gov.goldfinch.finance/t/gip-35-untangled-goldfinch-rwa-reporting/1334/3 "2022-12-13T13:27:56Z")
The proposal is good, but the community already voted for similar kind of reporting `GIP-20: Financial reporting through Messari’s Protocol Services`. I am not sure how much this proposal differs from GIP-20, community definitely don’t want redudant ones. ---
**Author:** ![MUntangled](https://avatars.discourse-cdn.com/v4/letter/m/977dab/32.png) [@MUntangled](https://gov.goldfinch.finance/u/MUntangled)\ **Post date:** [December 13, 2022, 4:51pm UTC](https://gov.goldfinch.finance/t/gip-35-untangled-goldfinch-rwa-reporting/1334/4 "2022-12-13T16:51:36Z")
Hello @mans9841 , Untangled proposal differs from Messari proposal in 3 fundamental aspects: Purpose and audience - Untangled focuses on credit portfolio risk monitoring and management. The audience therefore is existing investors/lenders and DAO management teams Scope - We provide in depth credit reporting based on both on chain and off chain data (working with borrowers) with a focus on probability of default (PD) and loss given default (LGD) which in turn drive the Net Asset Value (NAV) calculation of the portfolio. We are not doing analysis on lenders/investors distribution, lender turnover in various pools, protocol treasury or high level borrower analysis. There is very little overlap between the 2 scopes. Timing - We provide data on a much shorter time scale, in any case no later than monthly (instead of semi annually). Again this is because effective credit management requires up-to-date data. Some reports such as NAV calc will be done on a daily basis while others are as and when required. In a way Untangled service is analogous to that of Gauntlet (but focus on counterparty and credit risk). In the example of Compound, Gauntlet provides risk simulation etc but Messari works on investor relation reports. ---
**Author:** ![JeremyKim](https://avatars.discourse-cdn.com/v4/letter/j/54ee81/32.png) [@JeremyKim](https://gov.goldfinch.finance/u/JeremyKim)\ **Post date:** [December 26, 2022, 10:29pm UTC](https://gov.goldfinch.finance/t/gip-35-untangled-goldfinch-rwa-reporting/1334/5 "2022-12-26T22:29:05Z")
@mans9841 I do agree with @MUntangled that the two proposals are different - it appears that the Messari proposal focuses on the protocol’s financials, whereas Untangled seems to be focusing on reporting of the pools. I definitely agree with the spirit of the proposal, along with some of the statements made in the proposal itself: > [@MUntangled](#): > > Institutional investors, the key to Goldfinch’s growth, will demand the standard of disclosure to be at least as robust as in TradFi before deciding to supply liquidity to the protocol (e.g. [Aave](https://governance.aave.com/t/helping-aave-think-through-rwas/10684)) → Untangled mentions Aave, but I’d venture to say that any institution with tradfi structured credit roots will demand the same level of reporting as a bare minimum. However, I do have a few thoughts/concerns: - Receiving a fee, by its nature (especially a fee benchmarked as a percentage of loan balances outstanding), makes the reporting not fully independent. - Some of the bullet points listed in “Portfolio reporting and analysis” sounds like there will be some sort of analysis done - my personal thought is that if Untangled opines on credit or operational execution, then there may be a deviation from pure reporting (i.e. what trustees for private credit/structured credit deals in tradfi do). - Untangled’s core business model is to supply RWA collateral to DeFi, not necessarily white-labelling reporting infrastructure. As much as the RWA DeFi industry has the “rising tide raises all boats” mentality, I would imagine that the credit funds borrowing from Goldfinch and deploying via asset-based structured credit facilities see themselves also as suppliers of RWA collateral to DeFi. I wonder how comfortable the GF pool borrowers will be on working with Untangled. - Focusing on PD, LGD, and NAV fall short of what rating agencies do when they report on credit risk. If the intent is to do what rating agencies do, then Untangled would have to calculate PD, LGD at the underlying collateral level, roll that up to the debt facilities, then roll those debt facility cash flows up to the GF funding facilities. I’m wondering if it makes sense for Untangled to share some examples of reports/reporting (redacted where needed), to provide a better understanding of the work that is being proposed. Otherwise, how would Untangled differentiate itself from other existing tradfi solutions, like for instance, Finley? Also, just a thought - I wonder if it makes more sense for Untangled to partner with Goldfinch, not to provide reporting infrastructure, but to launch a pool, and provide these reports themselves, to set the standard? ---
**Author:** ![MUntangled](https://avatars.discourse-cdn.com/v4/letter/m/977dab/32.png) [@MUntangled](https://gov.goldfinch.finance/u/MUntangled)\ **Post date:** [December 28, 2022, 12:12pm UTC](https://gov.goldfinch.finance/t/gip-35-untangled-goldfinch-rwa-reporting/1334/6 "2022-12-28T12:12:53Z")
Thanks for the thoughtful comments @JeremyKim. We will start with the more ‘technical’ ones and return to the more ‘commercial’ ones later. > Some of the bullet points listed in “Portfolio reporting and analysis” sounds like there will be some sort of analysis done - my personal thought is that if Untangled opines on credit or operational execution, then there may be a deviation from pure reporting (i.e. what trustees for private credit/structured credit deals in tradfi do). ![](https://canada1.discourse-cdn.com/flex035/uploads/goldfinch/original/1X/194cd0b907a1e922282b2edeb39cbb939b1807cf.png) The above is a stylised collateral flows and proposed RWA reporting at the start and end states. Fund flows: Goldfinch makes Loan 1 (onchain) to a Credit Fund borrower, secured (offchain) by Loan 2 which the Credit Fund has made to a Fintech Originator. Loan 2 could be secured by Loans 3 to Fintechs. So here Loans 3 is RWA collateral for Loan 2 and Loan 2 is RWA collateral to Loan 1 (Pool loan). Start: Enhanced pool credit reporting As we would be bound by existing credit agreements, i.e. if an agreement does not provide for ‘looking through’ underlying collateral performance then the credit fund is not obligated to provide data. At first, we may not require additional access to underlying originators in order to provide enhanced reporting. We can gather information that indicates their ability to repay the facilities from the credit funds from other sources. The analysis will be parameterised - for example when we report on NAV we will agree with the community on the parameters such as, PD, LGD, …based on industry ranges for the type of underlying collaterals. > Focusing on PD, LGD, and NAV fall short of what rating agencies do when they report on credit risk. If the intent is to do what rating agencies do, then Untangled would have to calculate PD, LGD at the underlying collateral level, roll that up to the debt facilities, then roll those debt facility cash flows up to the GF funding facilities. End state: “look-through” on chain credit reporting and analysis Ultimately the health of Loan 1/Pool Loan depends on the health of the loans/collateral made downstream (Loan 2 and Loans 3). Therefore RWA reporting also needs to extend downstream to collateralise Loan 2 and Loans 3. This look-through reporting, however, requires appropriate legal provisions and reporting capabilities of downstream borrowers. This is the target of RWA reporting at the end state. As we gather more data we will be able to construct better credit models to predict and scenario-analyze credit performance of pool loans. > Untangled’s core business model is to supply RWA collateral to DeFi, not necessarily white-labelling reporting infrastructure. As much as the RWA DeFi industry has the “rising tide raises all boats” mentality, I would imagine that the credit funds borrowing from Goldfinch and deploying via asset-based structured credit facilities see themselves also as suppliers of RWA collateral to DeFi. I wonder how comfortable the GF pool borrowers will be on working with Untangled. We are not a credit fund but a tech provider. By supplying RWA collaterals to DeFi we meant any RWA asset owners can use our technology to supply assets to DeFi. We have discussed connecting a credit fund in the Goldfinch ecosystem to asset originators that we sourced. With this proposal, we are not aiming to replicate TradFi but implement a credit reporting system that is fit-for-purpose for RWA DeFi credit today. This system is based on: - Tokenization of RWA collaterals - each collateral is tokenized into an NFT with appropriate metadata - Reporting on key credit performance indicators by pools e.g. onchain NAV calc and covenant compliance - Credit modelling: inputs into NAV calc with PD, LGD appropriate for the underlying collateral asset class as described above. > Receiving a fee, by its nature (especially a fee benchmarked as a percentage of loan balances outstanding), makes the reporting not fully independent. Regarding fee we see this is as the protocol outsource the credit risk reporting to Untangled. We propose to be awarded fees from the protocol’s treasury, rather than from originators. This is to ensure that we are independent of the originators who we will report on. This is also inline with TradFi industry practice where fees are paid out of the cash flow waterfall. As to % of loans outstanding this is as you probably know, an industry practice. Our fee is based on principal outstanding which is an objective number that the protocol tracks. —- As to sample reports, we could create a folder and share it with the community. Finally, we welcome the opportunity to partner with Goldfinch on bridging originators/borrowers to the protocol. We believe we could do this while providing the protocol with credit reporting and analysis with the above specs. ---
**Author:** ![quntangled](https://yyz1.discourse-cdn.com/flex035/user_avatar/gov.goldfinch.finance/quntangled/32/208_2.png) [@quntangled](https://gov.goldfinch.finance/u/quntangled)\ **Post date:** [January 23, 2023, 5:07pm UTC](https://gov.goldfinch.finance/t/gip-35-untangled-goldfinch-rwa-reporting/1334/7 "2023-01-23T17:07:58Z")
Goldfinch is working on a really important solution of DeFi RWA credit - undercollateralized lending - and to get it scaled, as @MUntangled and @JeremyKim pointed out it is important to get institutional investors’ backing. TradFi institutions are already accustomed to the standard of reporting and monitoring (when done right) but DeFi institutions like [Maker is now becoming even more rigorous with RWA reporting (gov vote just passed today)](https://vote.makerdao.com/polling/QmaKWQtf#vote-breakdown). Would love to hear the community’s further feedback on this proposal before deciding to put it forward for a Snapshot vote (or any other governance step, please advise).