Cred Protocol introduced the first decentralized credit ratings
Cred Protocol, a decentralized credit scoring startup, has unveiled the results of its first automated credit rating system for users of the Aave Decentralized Finance platform (DeFi). It is reported that the scoring mechanism will be expanded to Compound and MakerDAO in the near future.
"Over the past few months, we have been working on creating one of the first credit ratings for DeFi. Today we are happy to share with the world the results of our first credit rating!", - said Julian Gay CEO of Cred Protocol on Twitter.
FurtherJulian Gay outlined the results of a series of tweets that showed that Cred successfully used data from past transactions in the Aave protocol to assess the creditworthiness of future borrowers based on their behavior in the popular DeFi application.
Using machine learning to evaluate account attributes based on time and analyzing user behavior in the past, Cred Protocol generates a "health factor" score that predicts the probability of future liquidation for a single address, which, according to Gay, was one of the strongest basic predictors of creditworthiness.
ROC-delay prediction curves. Source: Julian Gay's Twitter post.
Cred Protocol claims to make decentralized finance more accessible to the whole world by introducing reliable credit ratings that will allow "anyone with an Internet connection" and a "good financial reputation" to access loans.
Where the creditworthiness of borrowers and lenders is assessed by a central authority such as a credit bureau, DeFi allows financial services to be provided through a peer-to-peer (P2P) system, eliminating the idea of an intermediary or central authority.
Famous DeFi Researcher Chris Black expressed concern that a borrower could use multiple Ethereum addresses to circumvent credit scoring.
"So it's just a credit rating for this 1 Ethereum address? What if someone uses 10 different addresses?" asked Chris Black.
Gay replied to him that a potential solution is in beta.
Cred Protocol is a small team of nine people based in San Francisco with additional "hubs" in New York and London. However, Gay says he aims to bring DeFi technology to more than one billion people.
In a message on Medium, the Cred team outlined its plans to develop an evaluation mechanism for the Aave protocol and expand data analysis to other lending protocols, such as Compound and MakerDAO.
At the same time, Cred is not the only scoring solution in the DeFi sector. Two years ago, the Teller blockchain lending protocol raised $1 million in an initial funding round to incorporate traditional credit ratings into DeFi.
In November 2021, the Credit DeFi Alliance (CreDA) officially launched a credit rating service that will determine a user's creditworthiness using data from several blockchains. CreDA was designed to work with Oracle's CreDA by evaluating records of past transactions performed by a user on multiple blockchains using artificial intelligence (AI).
Recently, RociFi labs' P2P lending protocol has attracted $2.7 million in seed funding in partnership with asset management firm GoldenTree, which aims to introduce on-chain credit ratings for decentralized finance.
https://coin-signal.com/cryptonews/cred-protocol-introduced-the-first-decentralized-credit-ratings/
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