The first question we get when we mention that Heron Finance was built using blockchain technology, is often: “Why?”
Blockchain affords many benefits, including reduced transfer costs, greater transparency and interoperability. You can read more about those benefits here.
This article is about the questions we get after that first question. For example, you might be wondering how much you need to know about crypto to begin investing with us, whether you need to own a digital wallet, or if Heron Finance makes cryptocurrency loans (the short answers are: nothing, nope, and never).
In this article, we’re going to take you through some of the questions you might have about blockchain, and do our best to answer them for you:
What blockchain or cryptocurrency experience do I need to have before investing on Heron Finance?
This one is easy: absolutely none!
Do I need to own any cryptocurrency in order to get started on Heron Finance?
No, you don’t need to deposit crypto into your Heron Finance account to begin investing with us. Investors on Heron Finance can start investing right away via standard wire transfer or ACH from their bank account. If an investor deposits USD via wire or ACH, our on-ramp partner automatically converts the funds into USD Coin (USDC) so they can be used on the blockchain. Then, when the investor wishes to withdraw, the funds are converted back into USD. The transfers from USD to USDC and back again are seamless.
For reference, USDC is a regulated stablecoin, fully backed by cash and highly-liquid cash equivalents, and is redeemable 1:1 for U.S. dollars[1]. The majority of the USDC reserve is held in an SEC-registered 2a-7 government money market fund, with the rest held in cash amongst the world’s largest banks, hence USDC is often referred to as a “stablecoin.”[2].
Can I deposit my own USDC?
Yes. If you have USDC, a stablecoin issued by Circle Internet Financial Inc. (“Circle”), you may deposit it into your Heron Finance account to begin investing. The portfolio of the Circle Reserve Fund, which can contain short-dated US Treasuries, overnight US Treasury repurchase agreements, and cash, is custodied at The Bank of New York Mellon and is managed by BlackRock.
Investors on Heron Finance can connect their wallet and fund their account with USDC (which clears instantly, as opposed to the 2-5 days it takes for traditional bank transfers to clear).
Does Heron Finance invest in deals denominated in cryptocurrency?
Absolutely not. All Heron Finance deals are denominated in dollars–and we never use volatile crypto like Bitcoin or Ethereum as collateral. In other words, the deals are backed by traditional assets, and are not backed by cryptocurrency.
The key takeaway here is that Heron Finance is a blockchain-based RIA, not a cryptocurrency-lending platform.
How are Heron Finance borrowers collateralized?
Deals on Heron Finance are collateralized by traditional assets like income, PP&E, inventory, receivables, etc. from companies doing a wide range of productive activities from building real estate, to tech-enabled SME lending. None of the deals are collateralized with cryptocurrency.
Deals on Heron Finance typically contain the standard collateral types that you’d expect in any conventional private credit transaction. And Heron Finance is subject to the same Securities and Exchange Commission (SEC) regulations as any “internet advisor” (the official term for robo-advisor), which is what we are registered as with the SEC.
How is Heron Finance regulated?
Heron Finance is registered with the SEC, and we must comply with federal securities law and regulations. We have always prioritized compliance as foundational, and strive to meet the highest standards in this regard.
What are the security risks associated with blockchain?
Blockchain, as a technology, has been around for decades. Any maturing technology carries security risks, and blockchain is no different.
Heron Finance mitigates these risks by working with a world-class engineering team that has experience developing secure products for some of the best companies in the world, including Coinbase, Airbnb, Meta, and others. We also leverage security best practices like unit testing, bug bounties, code reviews, and external audits.
Further, the Goldfinch protocol–which is the blockchain-based platform that Heron Finance is built on top of–has been battle-tested over the last three years. Since launching in 2020, the protocol has managed over $110 million in AUM[3] and raised funds from over 6,000 customers, with zero security incidents. The Goldfinch protocol has also received some of the highest marks from third party security rating agencies, including landing in the top 10% of projects rated by DeFi Safety[4]. In addition, Goldfinch incentivizes security researchers by maintaining an ongoing $500k ‘bug bounty’ program that has already paid out over $100k in rewards to numerous security researchers who have disclosed incidents before they cause any damage.
I’m not very tech savvy, and don't know how to use blockchain. Will that be a problem?
Many assume that to use a blockchain-based platform, they must first know everything there is to know about cryptocurrency. Early in the days of blockchain, this may have been the case. But today, the technology has evolved to the point where blockchain can operate efficiently in the background without users even knowing it is there–or having any experience with cryptocurrency whatsoever.
All of this is to say that you don’t need to be a blockchain expert to invest on Heron Finance. Linking your account is about as technical as it gets.
In Conclusion
Heron Finance was built using blockchain technology, but investors don’t need experience with blockchain or cryptocurrency in order to invest.
Our platform leverages blockchain to enhance certain benefits to investors, however, deals on the platform are dollar-denominated, and the deals are typically collateralized by traditional assets such as cash, inventory, receivables, etc.–and never by cryptocurrency.
As we noted earlier: Heron Finance is a blockchain-based RIA, not a cryptocurrency-lending platform.
It is our steadfast belief that investors in private credit should be able to access the many benefits of blockchain technology without having to immerse themselves in the world of cryptocurrency to do so. That is what Heron Finance offers–the benefits of blockchain, without the drawback of having to understand the technical complexities.
