First decentralized credit score released by Cred Protocol
Recently a startup
engaged in a decentralized credit scoring mechanism for users of decentralized
finance (DeFi) called Cred Protocol, released the findings of its first automated
credit scoring system on the Aave Protocol.
Cred Protocol creates a health factor score that forecasts the likelihood of future liquidation for a single address using machine learning to evaluate time-based account attributes and examine the user's prior transaction behavior. According to Gay, this score was one of the most effective baseline creditworthiness predictors. Gay asserts that he wants to make DeFi technology accessible to more than a billion people. Decentralized credit mechanism Cred Protool was first used in the Aave Protocol and is now being used in Compound and MakerDAO.
The findings have been described in a Twitter thread by Cred Protocol CEO Julian Gay and it demonstrated how Cred effectively used historical transaction behaviour on the Aave protocol to evaluate the trustworthiness of potential borrowers based on on-chain activity in the DeFi area. The Cred Protocol is a rating.
Cred Protocol states that it will increase global access to decentralised finance by introducing reliable credit scores which would allow "anyone with an internet connection" and "a strong financial reputation" to obtain loans. DeFi makes it possible to run financial services through peer-to-peer (P2P) system and eliminate the idea of an intermediary or central authority where borrowers and lenders have their loan worthiness assessed by a central authority such as a credit bureau.
Chris Blec, a well-known DeFi researcher, expressed worry that a borrower would use several Ethereum addresses to avoid credit rating and Gay thinks that solution was in beta.
Cred Protocol is based in San Francisco. It is a small time of nine-person with additional "hubs" in New York and London. Scoring mechanism Cred Protocol was first used in Aave protocol.
To include traditional credit scores in DeFi, blockchain lending system Teller secured $1 million in a seed investment round two years ago.
Credit DeFi Alliance (CreDA) had formally introduce a credit rating service in November 2021 that could leverage information from several blockchains to determine a user's creditworthiness. CreDA was designed to work with the CreDA Oracle by analyzing historical user transactions across many blockchains using artificial intelligence (AI).
To enhance on-chain credit ratings for decentralized finance, P2P lending protocol RociFi labs has completed a seed funding of $2.7 million in collaboration with asset management company GoldenTree.
CBW - External Analyst