Overview Overview
At present, DeFi lending is mainly in the form of digital currency asset mortgage, and the lack of credit loans based on user credit authorization greatly limits the product form, user scale and business development of DeFi lending. Lending platforms including Aave, Zero Collateral, and Wing.Finance have all made relevant attempts, but the relevant product forms are not purely unsecured loans based on credit evaluation, but low-mortgage loans based on credit evaluation or secured loans. This is mainly because the current DeFi world lacks a purely on-chain credit reporting system and a legally recognized debt settlement system.
Report report
Report report
Digital Currency Lending Market
According to the statistics of DeBank, a third-party DeFi data organization, the loan scale of DeFi loans has reached 2 billion US dollars, which is a growth rate of 14.92 times compared with the loan scale on September 30, 2019. The top lending platforms are Aave, Compound, etc., and the loan form is mainly mortgage loan, which requires users to over-mortgage the digital currency in their hands, which greatly limits the liquidity of assets.
In the traditional financial market, the proportion of credit loans in commercial loans is not low, such as credit cards, consumer loans and other credit loans have already penetrated into all aspects of our daily life. Taking the United States as an example, in 2020, the size of the mortgage loan market in the United States will be 11.05 trillion US dollars, and the scale of credit loans will be 4.11 trillion US dollars, which is about 37.2% of the size of mortgage loans.
Therefore, the DeFi world needs to change the form of mortgage-only lending, and provide users with non-mortgage loans to serve users with a good performance history and love digital assets, and lower the threshold for users to enter DeFi lending products.
The core threshold of DeFi credit loan products
For the development of traditional credit loan business, a complete user credit investigation system is very important. It can record the user's historical default and performance information, and help the loan platform to judge the user's default risk. In the field of digital currency, which focuses on anonymity, there is no credit investigation system to record users' credit performance, and it is impossible to use lending platforms to identify users' default risks, which leads to the vast majority of DeFi loans being mortgage loans.
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settlement system
The main function of the credit investigation system is to control in advance, that is, at the loan application stage, the lending platform identifies whether the user has a mortgage, mortgage interest, default risk, etc. based on the user's historical performance/default information.
However, the role of the credit investigation system is limited, and an enforceable default debt settlement system is needed, that is, the lending platform can use the judicial system to fulfill the rights and interests of creditors, requiring debtors to liquidate other properties to repay creditors and compensate creditors for their losses.
DeFi credit loan product introduction
Aave
As the current largest DeFi lending platform, Aave has always focused on mortgage loans, and announced in July 2020 that it will launch credit loan products in the future. It allows credit delegation between users, that is, user A can authorize his own loan credit to user B, so that user B can apply for an unsecured loan. But once user B defaults, the system will liquidate the mortgage assets of user A.
The design logic of Aave’s credit loan products is more similar to secured loans in traditional finance, that is, if a user does not have mortgage assets but wants to apply for a loan, he must find a guarantor who is willing to guarantee his debt and pay the guarantee fee.
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Zero Collateral
At the same time, the guarantee terms between the two parties will be generated by the legal smart contract platform OpenLaw into a final legal contract, which will be recognized by local legal agencies. Once the guaranteed party breaches the contract, the guarantor can resort to the law to safeguard its economic interests.
The Zero Collateral project was officially launched in January 2020. The main direction is unsecured loans. The lender needs to ensure that the value of the digital currency pledged is equal to the loan amount minus the total interest paid for all previous loans. As the number of loans increases, the value of collateral required for loans will eventually drop to zero. To put it simply, the better the performance credit, the lower the pledge assets required by users.
The agreement stipulates that each wallet can only have at most one active loan, and the user can apply for another loan after paying off the principal and interest. And after the repayment is completed, the upper limit of the new loan amount will be increased by 50% of the historical accumulative repayment interest amount. For example, if the first loan is 1 DAI and the repayment interest is 0.12 DAI, then the maximum amount of the user's next loan will be increased from the previous 1 DAI to 1.06 DAI.
Wing.Finance
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The Wing project is a DeFi loan project launched in September 2020. It is based on the Ontology ONT public chain, not the ETH public chain. In the design of loan products, Wing will introduce a credit evaluation mechanism to reduce the pledge rate of user assets, and gradually realize unsecured.
The Wing credit mechanism collects the real KYC information of the user by means of the digital identity system of the ONT ontology chain, and completes the judgment of the user's performance risk.
The platform will gradually judge the user's asset mortgage rate based on the user's historical performance information. If the loan performance on the Wing platform is good, the user will be required to have less mortgage assets.
According to the disclosure of the Wing project white paper, the V1 version of the product will not retain the user's personal information, but the following authorization is required:
Personal real name authentication;
Wing credit score certification;
Conclusion
Conclusion
Credit loans are the next important direction for the development of DeFi lending platforms, and the two major thresholds facing the major lending platforms are: the credit investigation system and the settlement system. However, Aave, Zero Collateral, and Wing have all made relevant attempts and explorations. The essence of Aave is secured loans, and Zero Collateral is to gradually reduce the pledge rate through credit accumulation, while WING introduces a real-world KYC information based on users. credit system.
risk warning:
risk warning:
Be vigilant against illegal financial activities under the banner of blockchain and new technologies. The standard consensus resolutely resists various illegal activities such as illegal fundraising, network pyramid schemes, ICO and various variants, and dissemination of bad information using blockchain.
