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Using Your Credit History in Web3: How Mixed Ratings Can Lead to Better Access to Credit for Everyone

Your credit score is important. Whether it’s buying a home, signing a contract for services, financing a car, and much more, your credit score acts as a measure of your access to capital. Anyone who lends you will see it and use it as one of the ground rules for their lending decision, and most importantly, the rate of interest you have to pay to borrow money.

However it is ready for improvement. SoLo . protocol It provides encrypted loans using real-world transaction data explored through machine learning, and combined with on-chain analytics, to produce a truly unique credit score, lending service suitable for web 3 generation.

Why do credit reports have problems

Credit reporting is not a perfect system. Credit scores, collected by agencies such as Equifax, Experian, and dozens of other providers, don’t tell the whole picture. They are authoritarian in their approach, and adjusting your credit profile can be like walking the seventh circle of hell, even if the reason for a flaw isn’t your fault in the first place. However, for better or worse, your credit score currently serves as the main scaffolding for all of your future financial decisions in the TradFi platform. This must change.

This kind of reductive attitude to an individual’s credit rating is problematic. Some who have poor credit in traditional financing systems may be very wealthy, but still cannot get a mortgage on a home. There are many who have achieved success in web 3, who are rich in cryptocurrency, but the bank does not even think to lend them. This, too, is a problem. Credit scores because of a change, a new approach, and SoLo is creating that approach.

With new financial systems currently being built on-chain, and an increasingly skeptical attitude toward services offered by major banks thanks to innovations in the DeFi space, adoption is likely to continue very fast, particularly as the next bull market hits, and web3 terrain is more sophisticated to accommodate it.

How will adoption bring credit worthy users to web 3

This will result in many casual users entering cryptocurrencies and considering them as more than just a speculative asset. Users without web3 experience will be eager to start buying land, NFTs, game tokens, corporate experiences, and more, all through the metaverse funnel. This means that there will be subscribers in the space who may have impeccable credit scores that have built up over the years, but not have access to the web3 capital they need, except for already providing the entire capital.

These users will search for loans with lower security in Web 3 just as they might search for a car loan or mortgage in the “real world”. They have stable jobs and a steady income, and they are used to advancing their lives with credit so that they can buy homes, invest and grow.

There will be a great need to lend and borrow in DeFi without excessive collateral. Excess collateral loans, where the loan is less than the deposit used to obtain it, are all well and good for energy traders who manage effectively long-term on the underlying asset, but it is useless for the vast majority of users who are not looking to produce a farm or increase capital efficiency – they just want borrow money.

How Solo Protocol’s Mixed Credit Scores Will Produce Fairer Loans

SoLo . protocol It is a service that will use adaptive machine learning to capture open banking data about a user, then combine it with on-chain analytics to create a hybrid method for determining creditworthiness. Nobody does this, SoLo is the first.

This type of machine learning credit assessment has also been used to make a huge impact by Glory creditrecently acquired by Apple. SoLo wants to get this model and apply it to web3. Credit scores are unfair to tens of millions of Europeans and Americans “invisible credit” or have very little credit history. Young people and immigrants are more vulnerable to thiseven if they have a good history of fulfilling their rental and mobile obligations.

“It will open access to crypto and web3 to crypto non-nationals who can take advantage of their large credit score and access funding for the new metaverse.” “It will also allow crypto holders with successful wallets to borrow the capital they need to perform ‘real-world’ activities such as home and car purchases, repair work – and much more,” says Tom G, co-founder of SoLo. Using on-chain analytics to help evaluate a user’s Web 3 profile means Solo will be able to issue loans to people who might not have access to traditional services, but their Web 3 footprint means they are worthy of funding.

The Solo Protocol’s hybrid credit system is different from most DeFi protocols. They see value in extracting creditworthiness from real-world transactions, and by bringing them to bear on the blockchain, it has the potential to help drive growth in web3 by creating on-chain wealth through standardized savings and loans much like the TradFi process, but in web3. for example, In beta versionthe user can link their Wise account – along with several other banks – and evaluate that data in order to assess the amount of loan SoLo can provide.

Moreover, these savings and loans, since they are built on personal data and open banking data, are likely to be cheaper than traditional DeFi borrowing. DeFi’s borrowing rates – even though collateral deposits are greater than the amount borrowed – are very high, because users who are borrowing the amounts aren’t desperate for cash or trying to buy assets – but they enact complex trading strategies and agricultural returns. It’s the difference between an investment bank lending to a hedge fund and a retail bank loan to an individual. The first is useful for some, and the second is beneficial for all.

SoLo brings TradFi systems to DeFi innovation

SoLo is completely different from most DeFi protocols. In many ways, it mirrors TradFi’s services, but improves upon it by hybridizing on-chain analytics with open-chain banking data analyzed using machine learning. The personal data used by the protocol is only accessed if the user is virtual, the SoLo protocol is decentralized and runs on the Ethereum and Polygon network.

However, the SoLo protocol knows that the only way to really get credit markets flowing is to hook up the hardware that has served TradFi systems so well for so long, improve them through machine learning, and make them fit for the purpose of the original crypto generation. The first beta product just launched, so head over to the website for SoLo . points And take advantage of a new type of retail financing.

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