Credmark Credit Score

== For developers / fintech people ==

We are using all credit events generated in the crypto spaces to produce credit data for all blockchain addresses. We support anonymous/pseudonymous, and KYCed use-cases. We work cross-chain so our credit data on Cardano will benefit from activity on Ethereum and Bitcoin, thereby quickly bootstrapping an environment capable of hosting financial services that require credit data.

We currently have a consumer credit product in production and are working on developing a corporate/bond rating product.

Without credit data loan product developers are severely constrained. The only way they can manage default risk is by over-collateralizing every loan. This in turn limits the market of potential users to traders and speculators.

With credit data developers can design products that:

1. require less than full collateralization,

2. allow variable liquidation grace periods, and

3. allow variable rates based on borrower's past behavior.

These products will appeal to a far greater audience.

== For normal people ==

You've probably heard there's a lot of lending going on in crypto. It's pretty big and it's growing fast. (If you want details you might want to read the crypto credit report we produce every quarter. It provides the best snapshot of the industry. This is the latest: https://reports.credmark.com/TheCryptoCreditReport-q2-2020.pdf.

The problem with all this lending is that it's over-collateralized. This means that if you want to borrow x (say 1 BTC or 10,000 USD), you need to provide 1.5-2x as collateral. Why would anyone do that? Normal people wouldn't, but for traders it can sometimes make a lot of sense.

The collateral ensures that the lenders don't lose their shirt if the borrower doesn't repay the loan. You can think of collateral as a very crude way of mitigating default risk.

The other way that lenders mitigate risk is by evaluating the trustworthiness of the borrower. If it's a personal relationship, it's easy. I wouldn't lend my uncle money because I know he's a deadbeat, but I'd happily lend my Dad money because he's super reliable and sticks to his word. Unfortunately, in most cases lenders don't know the borrowers, at least not personally. In those cases they need to rely on data that indicates the trustworthiness of the borrower. That's what credit scores are. They are neatly-packaged trust indicators. A credit score is the culmination of the analysis of thousands of pieces of data. Pretty sophisticated stuff but absolutely necessary in any well-functioning financial system. Without credit life would be very different.

So why is Credmark re-inventing the wheel? Why can't crypto lenders just use a normal credit score? The first problem is that crypto is global, but credit scores are local. An American credit score isn't valid in Singapore. In fact a lender in Singapore might not even know what it means. Given the number of jurisdictions, trying to use local data to provide a global service is far from ideal. The second problem is that a lot of lending is done anonymously. No one knows who's borrowing and lending through all these DeFi protocols.

Using a mix of collateral and credit data, we can allow normal people to borrow in the crypto space. This is a massive improvement over our current situation. Credmark is working with lenders on Ethereum to build these new loan products. We are convinced that a lot of liquidity is going to move to Cardano quickly, and we want to be in a position to support emerging lending products right away.

== Budget ==

We are asking for 500K ADA because we have a good idea of how much work this will involve. We need to:

1. Integrate with Cardano

2. Build out cross-chain clusters (so that credit data from Ethereum address clusters, for example, can be associated with Cardano address clusters)

3 Integrate with Cardano oracle pools.

We estimate that this will require 9 months of developer work, which costs us about $112K. The requested amount covers less that 1/2 of that but we have been planning to invest in a Cardano solution, so are more than happy to contribute the remainder of the budget.

500000