Cred Protocol, a decentralized credit rating system, has published the results of its first credit score on the Aave Protocol and plans to extend to Compound and MakerDAO.
Cred Protocol, a business engaged in decentralized credit scoring, recently released the findings of its initial automated credit scoring system (DeFi).
The findings, as described in a Twitter thread by Cred Protocol CEO Julian Gay, demonstrated how Cred effectively used historical transaction behavior on the Aave protocol to evaluate the trustworthiness of potential borrowers based on on-chain activity in the DeFi area.
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.
Cred Protocol states that it will increase global access to decentralized finance by introducing reliable credit scores that would allow “anyone with an internet connection” and “a strong financial reputation” to obtain loans.
DeFi makes it feasible to run financial services with a peer-to-peer (P2P) system, eliminating 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; Gay answered that a potential fix was in beta.
Founded in San Francisco, Cred Protocol is a small nine-person team with additional “hubs” in New York and London. Gay asserts that he wants to make DeFi technology accessible to more than a billion people.
Cred described its goals for developing beyond the Aave protocol and extending its data analysis to additional lending protocols like Compound and MakerDAO in a Medium article.
To include traditional credit scores in DeFi, blockchain lending system Teller secured $1 million in a seed investment round two years ago.
Related Article: How Can Blockchain Technology Affect Credit Scores?
Credit DeFi Alliance (CreDA) will formally introduce a credit rating service in November 2021 that will 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.