RociFi’s DeFi Credit Scoring Terminology

In Chinese language: shorturl.at/jpwxJ

Overview

In order to borrow on RociFi, users must mint an ERC-721 NFCS token (Non-Fungible Credit Score). The NFCS proves ownership of the address bundle that the borrower wishes to be credit scored.

Unlike TradFi credit scores, RociFi’s is based on risk, meaning the lower the better. RociFi’s credit score scale is 1–10 where 1 is the lowest credit risk (best score) and 10 is the highest credit risk (worst score).

Good credit scores (1–6) provide access to under-collateralized loans while riskier ones (7–10) receive over-collateralized loans at LTVs above market rates.

The protocol assesses a borrower’s likelihood of defaulting on their debts by analyzing DeFi transaction history and behavior, coupled with web3.0 reputation.

A lower credit score means lower default risk which enables lower collateralization ratios and borrowing costs (APR).

In general, if a user has responsibly participated in DeFi, i.e. lending/borrowing/ liquidity provisioning/DEXes, and has a solid reputation, they will most likely receive a good score.

However, statistically speaking, the very best credit scores (1–3) are the hardest to receive. For example, we scored 10,000+ Aave borrowers and scores 1–3 comprised only 7% of total unique borrowers.

There are simple ways to improve your credit score.

1. Bundle multiple wallets with long transaction histories; preferably at least 200 days.

• For example, an NFCS bundle with an average age of 100 days is less likely to receive a good score than one with 400 days.

2. Avoid connecting new wallet addresses with no transaction history to NFCS.

• Those addresses are rated the worst given there is no information to score.

3. Ensure addresses in NFCS have interacted with DeFi protocols, e.g. lending/DEXes/Farms/Governance.

• Intuitively, an NFCS that has never taken out a loan in DeFi but requests an under-collateralized loan from RociFi is a red flag.
• The higher quality the interactions, the more likely a better credit score result, i.e. avoid highly speculative activities or scams.

4. Connect addresses with strong web3.0 reputations; preferably linked to the following:

1. Decentralized ID database — Ceramic (IDX), Sismo, Bright ID, etc.
2. ENS
3. DAO Participation — Rabbithole, Coordinape, Gitcoin, etc.
4. Social Graph — CyberConnect, Lens, etc.
5. NFTs — CryptoPunks, BAYC, MAYC, etc.

5. The successful repayment of RociFi loans, on-time — both under-collateralized and over-collateralized.

RociFi is the Layer 1 for a permissionless, multi-chain web3.0 credit economy