Right now, crypto lending is largely limited to cases where assets are overcollateralized and are mostly utilized for additional leverage and speculation for holders of crypto. The speculation story is the most attention grabbing. Alongside this, we’ve quietly seen demand for crypto for a means of exchange and as a store of value. There’s a segment of crypto users in locations with hyperinflation or still developing banking infrastructure.
As a whole, 140m borrowers accessed micro-loans totaling over $124B, with both numbers ~8% YoY. This is a growing segment with a clear need that crypto-based micro-lending might be able to help.
Instead of asking people to download a crypto wallet to buy some Bitcoin, the experience of downloading an app where a user has a chance of accessing credit by providing a small amount of personal info seems like a compelling offer. From here, a user would be able to both build a global credit score as well as be onboarded to all of DeFi (investing in synthetic assets, saving and more).
There are a few questions for anyone interested to answer:
No On-Chain Credit Score / Risk Stratification. Right now, no on-chain credit score exists. However, in the microlending case, not many users have existing credit. Instead, this can serve as building a global credit score for currently underbanked individuals. By extending Edgeware’s built-in identity pallet to include encrypted claims. A borrower's linked identity, might be used to build the basis of a crypto credit score. Either way, there should be risk models that we can borrow from traditional microlending.
Repayment. Traditional mobile microlending has had to deal with the same issue, in the case of Okash have been able to scale to +$40m/yr in revenue in despite credit losses. They have been able to solve some cases by essentially asking for more KYC and Social information.
Will Crypto Lenders Lend? Potentially. Right now, yields in DeFi are quite high. However, microloans are often 4 months in duration and offer monthly interest rates from 4% - 13%. With default rates are 15% for repeat borrowers, this risk-return seems in line with existing crypto holders' yield expectations. This can also be subsidized by also minting governance token.
How do you gain initial traction?. Can bootstrap borrowing with also giving some ownership with “farming” token for both merchants and users alike. Additionally, some Venmo or viral mechanics can come into play here, where borrowers can "vouch" for each other's credit.
Local currency on and off ramps. Integration into merchants and or local fiat currency will be important. Allowing people to exchange at https://localcryptos.com/ and or store locations.
Which market? Crypto is global from day 1. Figuring out an initial launch market, may need to think through existing exposure to crypto and competition with traditional microlending.
Why is Edgeware a good place for this?
As Ethereum continues to be the place for high value DeFi transactions for whales, lower value transactions are getting pushed off in terms of high gas usage. Edgeware has ample blockspace to serve this use case.
The Edgeware Treasury can be the initial lender, bootstrapping the cycle of liquidity. Once a stablecoin is integrated into the network.
As mentioned before, the integrated identity system can be a good place to add claims to a specific individual.
Blueprints
TBD
Working Criteria
[ ] [Checkboxes for working conditions that are necessary to this being tracked]
Acceptance Criteria
[ ] [Checkboxes for features that are necessary to this being completed]
Description
A system for issuing micro loans using identity.
Context
Right now, crypto lending is largely limited to cases where assets are overcollateralized and are mostly utilized for additional leverage and speculation for holders of crypto. The speculation story is the most attention grabbing. Alongside this, we’ve quietly seen demand for crypto for a means of exchange and as a store of value. There’s a segment of crypto users in locations with hyperinflation or still developing banking infrastructure.
As a whole, 140m borrowers accessed micro-loans totaling over $124B, with both numbers ~8% YoY. This is a growing segment with a clear need that crypto-based micro-lending might be able to help.
Instead of asking people to download a crypto wallet to buy some Bitcoin, the experience of downloading an app where a user has a chance of accessing credit by providing a small amount of personal info seems like a compelling offer. From here, a user would be able to both build a global credit score as well as be onboarded to all of DeFi (investing in synthetic assets, saving and more).
There are a few questions for anyone interested to answer:
Why is Edgeware a good place for this?
Blueprints
TBD
Working Criteria
Acceptance Criteria
Bounty
[Amount paid in EDG]