1.2 Background
“Remember that credit is money” - Benjamin Franklin
The exponential growth of the DeFi industry has demonstrated decentralized financing as a viable alternative to traditional financing, which is currently inaccessible to 1.7 billion adults worldwide[1].
Whilst DeFi was born with a mission to bank the unbanked, it does have its own barriers to entry for participants. Such barriers have resulted in low asset utilization and reduced market participation:
Decentralized lending platforms operate in an over-collateralized manner with typical loan-to-value (LTV) ratios below 50% e.g. a DeFi platform with a 50% LTV would require a user to deposit at least $10,000 to take out a loan of $5,000
DeFi platforms will often only accept crypto assets as a form of collateral
In traditional finance, the total value of credit-based, unsecured loans is several times that of collateralized mortgage loans. As evidenced within traditional finance, credit ratings are a vital, missing component within the DeFi space. The introduction of CreDA credit scores will enable unprecedented imagination and innovation to protocol users and developers alike as DeFi continues its march into the future.
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