Web3 Credit Information Cornerstone: Quantification of On-Chain Behavior and Reputation

In the current Web3 world, there is no way to quantify the behavior of users on the chain, let alone economic value. The emergence of SBT will pave the way for the exploration of on-chain behavior records and coding, and even can encode the user’s credit records in the real world on the chain, and jointly build the user’s identity reputation from the chain and off-chain.

At the end of August, the founder of Ethereum, Vitailk Buterin announced that he will release a new book called “Proof of Stake” within one month. This book records the text content he has published for more than 10 years. At that time, the digital version and the physical version will be synchronized. Available. Before its launch, users can donate a digital version and a commemorative NFT with his signature on the donation platform Gitcoin.

This commemorative NFT is a bit special, it is not transferable. This is different from our common NFT under the Ethereum ERC-721 standard. It is also a practice of Vitailk on the “non-transferable Token” mentioned in the paper “Decentralized Society – Finding the Soul of Web3” in May. He sees it as a “Soulbound Token”.

The abbreviation of Soulbound Token is coming soon. SBT is translated as “Soulbound Token”, which sounds a bit metaphysical. In fact, it refers to a non-transferable, non-financialized kind of binding with the user’s wallet address in an image way. token. To put it bluntly, this token is tied to your soul and cannot be sold.

Soulbound (soul binding) was originally a concept in the game, derived from “World of Warcraft”. In this game, there is a kind of item called soul binding, which is bound to the player’s character and cannot be traded with other players, or transferred or given to other players, but can only be used by oneself. SBT draws on this method, which means that after the user’s wallet address has SBT, this SBT is equivalent to a label of the user’s address and will follow your wallet forever.

What is the value of SBT? What role does it play in the Web3 world?

Conceptually, SBT is unique, and Vitailk’s signature SBT condenses its reputation on a non-transferable NFT. This practice seems to explore the reputation mechanism for Web 3.0. When reputation and reputation are formed in the form of non-transferable Tokens, although they cannot be traded, they are connected to addresses, and the outside world can evaluate account reputation through SBT tokens, helping users to establish identity reputation and social value system in a decentralized world. .

At present, blockchain and its applications have financial assets (Token), and the activities on the chain are mainly concentrated in financial applications such as lending and trading. Decentralization brings free trading behavior, but if freedom does not have credit in the financial world As a guarantee, there will be problems, and “bad debt” is the manifestation. At present, the social trust relationship between users on the chain is still in the uncoded stage. More applications that require social evaluation lack the basis for expansion.

In the Web2 world, a user’s social reputation and value are quantitatively displayed by the platform. A Douyin blogger’s number of fans, video views, likes, and fans reflect his account value. However, in the current Web3 world, there is no way to quantify the behavior of users on the chain, let alone economic value. The emergence of SBT will pave the way for the exploration of on-chain behavior records and coding, and even can encode the user’s credit records in the real world on the chain, and jointly build the user’s identity reputation from the chain and off-chain. For example, a user’s on-chain address can be bound to SBT tokens such as personal education, work resume, medical files, real estate, etc., to enrich his personal labels, and even SBTize his consumption behavior, credit status, asset status, etc. to form a The on-chain version of “Sesame Credit”.

Before the concept of SBT appeared, some developers were already exploring how to locate value by analyzing user behavior on the chain, and some user behavior portrait tools began to appear. SBT may help developers create more user evaluation tools. This issue of Web3 Honeycomb will sort out the representative products of the reputation track on the chain.

Everything can be done on the NFT chain, right?

Labels exist in our daily lives. In the Web 2.0 world, your browsing data in apps or web pages is your network tags. Internet big data will perform algorithm analysis based on your data tags, complete user portraits, and then recommend content or advertisements based on the portraits. However, this data is in the hands of centralized internet platforms, who use and profit from it, and users have very little rights over the data.

In Web3.0, the on-chain tag is the behavior data record of your wallet address interacting with DApp. For example, when you borrow money on Aave and Compound lending platforms, there is never a record of being liquidated; the amount of funds you contribute to the liquidity pool when the DeFi application is first launched, and the voting history on the chain can be tagged; you purchase , The record of transaction NFT will also form a tag.

On-chain behavior is very important. It is hidden among the users of various DApps in the form of data traces. Blockchain big data companies have begun to label some special behaviors, such as money laundering. These labels aid in tracking wrongdoing. Labeling bad behavior prevents bad behavior. Is there value in labeling good behavior?

The answer is yes, a good on-chain behavior record can be used as a manifestation of credit, which is of great significance to on-chain finance. DeFi lending can not only determine how much you can borrow through mortgage, but also depends on your on-chain credit record.

It is also useful for application project developers. The development team of blockchain applications likes anonymity, but this also brings hidden concerns to users who use encrypted assets to use applications. Some bad projects run away and ruin the reputation of the industry. If there is a credit evaluation system on the chain, the developers and operators of the project do not need to disclose their names, just show your behavior records on the chain, and developers with no records can be vigilant.

The work of quantifying, analyzing, and labeling on-chain behaviors is mainly used to track bad behaviors. Some freelance developers are also exploring the labeling and even vouchering of good behaviors, applying them to credit reporting scenarios, and even other future needs. In the scene of the credit display.

Some projects are used to guide users to participate in activities and behaviors required by certain DApp partners, and issue on-chain certification to them. For example, POAP is an application that issues “Proof of Attendance”, which issues room vouchers NFT to those who participate in certain virtual events on the DApp chain or offline physical activities, proving that they are indeed present. Users can use these NFT credentials in their wallets to create a collection of badges that show their participation and show their activity.

Another representative application, Project Galaxy (GAL), is an open credential data network, which labels each address by issuing credentials to realize user portraits and help Web3.0 developers or project operators use credential data to build Better products and communities. After the user’s wallet is linked to ProjectGalaxy, a “Galaxy ID card” can be generated, which will automatically attach an “authentication certificate” according to the historical behavior of the address, such as “Aave loan user”, “OpenSea trader”, “BAYC holder” and many more.

In addition, the following applications are used to explore identity tags on the chain.

– RabbitHole, an on-chain behavior resume

RabbitHole, translated as Rabbit Hole, rewards users who learn to use Web3 applications for on-chain behavior. Users can acquire skills and obtain relevant certificates by learning NFT, DeFi, DAO and other knowledge on the platform. Unlock or complete on-chain tasks released by the platform to get the opportunity to get Token and NFT rewards.

Web3 Credit Cornerstone: Quantification of On-Chain Behavior and Reputation

Mirror tasks issued by the RabbitHole platform

RabbitHole decomposes each decentralized application interaction behavior into game tasks, guides users to interact with blockchain protocols and decentralized applications, increases the public’s understanding of the main functions of decentralized applications, and cultivates users’ DApp usage habits.

For example, RabbitHole publishes a task created on the decentralized writing platform Mirror. The user publishes an article on Mirror and mints the article into NFT. After completion, the wallet address will get a non-transferable NFT certificate (SBT).

These SBTs constitute the “authentication” of the user’s interaction with the DApp. With these SBT rewards, users can build their own on-chain behavior resumes on RabbitHole.

– Noox, an on-chain behavioral tokenization tool

Noox is an application on Ethereum that aims to build a decentralized on-chain behavioral achievement proof platform that publishes, certifies and mints on-chain behavioral achievement in a permissionless manner. Through the platform, users can discover on-chain behavioral interaction achievements curated by the community and mint them into non-transferable NFTs, Soulbound NFTs, also known as “badges.”

The Noox community can help DApps plan contextualized on-chain activities, hoping to build an open community for on-chain behavior tracking, allowing developers to program task rules into minted badge standards (such as the amount of transaction funds, transaction frequency, interaction behaviors) type, interaction time, etc.), support users to cast on-chain interaction behaviors into badge NFTs after completing tasks.

Web3 Credit Cornerstone: Quantification of On-Chain Behavior and Reputation

NooxBadge badge

In Noox, the minting basis of the user’s SBT badge is the data of the wallet address interacting with the DApp. Noox believes that wallet addresses are the key to creating digital identities for users in Web3, and the SBT badges that users have are unique identifiers to show their attributes, interests and achievements in the Web3 world and serve as their on-chain identity Unlock new opportunities. And applications and protocols can natively integrate badges and drive open innovation.

Noox Badge is a programmable on-chain achievement non-transferable NFT in this application. It uses plain text and graphics and images to visualize what users “did” on the blockchain, such as trading on OpenSea, for Uniswawp Provided liquidity, donated money in Gitcoin, registered ENS domain name, as long as the underlying data is recorded on the chain, this NFT can represent on-chain actions.

Is there a credit information system Web3.0 in the real world?

In addition to using credentials to measure users’ on-chain behavior applications, developers are also exploring to score users’ on-chain behaviors to form a quantitative and long-term evaluation mechanism for user credit.

Similar to the “Sesame Credit Score” in the Web2 world, the on-chain behavioral score system continuously updates and evaluates the performance of an address based on the user’s on-chain and off-chain behavior (such as transaction history, loan data, etc.) or multiple associated addresses. reputation. This simulates how on-chain identity reputation works in the real world. The difference is that these data on the chain can not only show the results, but also verify the basis for obtaining credit.

The on-chain behavior score system is automatically generated by an algorithmic model based on the user’s on-chain transaction data, snapshot voting data, DAO contribution and other indicators. For example, the duration score of holding encrypted assets, loan credit score, NFT holding score, etc.

DegenScore is a platform that scores users based on their behavior and experience in the Ethereum chain ecosystem. It quantifies users’ on-chain reputation value with scores. It enforces the same scoring criteria for each address (e.g. addresses with a Nonce greater than 500 on Ethereum get 65 points).

There are also the following applications to explore the on-chain credit evaluation system in the form of scores:

– On-chain credit scoring app Spectral

Spectral is an open, programmable, and composable on-chain credit scoring system that allows users to obtain on-chain credit scores based on their on-chain interactions, while supporting any decentralized application integration. The application aims to establish a Web3 user identity reputation system by using the transaction history on the chain, and then assist the utilization efficiency of the capital on the chain through credit risk analysis.

MACRO (Multi-Asset Credit Risk Oracle) is the first on-chain credit scoring tool launched by Spectral, which is similar to credit scoring applications in traditional financial markets (such as Sesame Credit Score), except that it is generated by on-chain transactions, and in the hands of the user.

The user obtains the MACRO credit score by linking the wallet, which represents his credit status in decentralized finance (DeFi) applications. The score is generated based on the user’s historical transaction data in different DApps, such as on-chain lending and repayment history, liquidation history, arrears and repayment amounts, positions that provide liquidity assets, DeFi transaction history, on-chain transaction activities and other data.

Behind MACRO is a machine learning algorithm model created based on DeFi data sets, which can update the latest measurement indicators in real time according to the development of applications on the chain. Currently, Spectral is integrating on-chain data sources for applications other than DeFi, such as NFT applications, etc., and is trying to extend the scoring system to chains other than Ethereum.

Web3 Credit Cornerstone: Quantification of On-Chain Behavior and Reputation

MACRO Credit Score

MACRO scores not only support users to obtain scores using a single wallet, but also support a user to generate scores by combining historical data with multiple wallet addresses. The Spectral app automatically retrieves all DeFi and non-DeFi related transactions associated with one or more wallets, using machine algorithms to generate on-chain credit scores ranging from 300 (indicating very low credit) to a maximum of 850 (indicating very high credit).

In addition, Spectrum introduces the concept of non-fungible credit NFC that represents the user’s on-chain transaction history, which represents a non-transferable NFT (ERC721) of the user’s on-chain transaction history, which allows users to package and bundle wallet addresses into a primary address and use it On-chain transaction history is synchronized to this NFC. When NFC and MACRO scores are linked together, a programmable framework of credit asset classes is created.

In traditional financial markets, users have to go through various banks or credit reporting agencies to get a credit score before they can apply for a loan. Spectral hopes to return the user’s credit to the user himself, because every transaction using the Ethereum wallet is stored on the chain, whether it is lending or payment, the data is open, transparent and verifiable.

Spectral’s credit scoring system already enables users to obtain variable-rate loans based on their scores, a first for Spectral NFC.

On August 24 this year, Spectral completed a $23 million financing, led by General Catalyst and Social Capital, with participation from Circle Ventures and Jump Capital. Spectral said the round will be used to build and gradually scale its credit scoring network. Back in November 2021, the app had closed a $6.75 million funding round, and it has raised around $30 million to date.

– Lending application ARCx builds “DeFi credit score”

ARCx is a decentralized lending application on the Polygon network. Unlike over-collateralized lending platforms such as Aave and Compund, it provides a dynamic loan amount with ETH as collateral based on the borrower’s DeFi credit score. On-chain activity to use the product’s rate platform.

In DeFi applications, all user interactions are based on wallet addresses, and addresses are anonymous. Therefore, at present, DeFi lending applications use full collateral for indiscriminate loans. ARCx tries to go the other way – continuously evaluating users’ on-chain behavior through predefined algorithms. At present, ARCx is mainly composed of two major products, the “ARCx Credit” lending application and the “DeFi Passport” on-chain credit scoring system.

On the ARCx platform, before users borrow with ARCx Credit, they need to perform a DeFi credit score, and conduct credit risk assessment for personal wallet addresses based on historical on-chain lending activities. Through these systems, borrowers using ARCx Credit will build their DeFi credit score, which will then determine the collateralization ratio of the loan.

Web3 Credit Cornerstone: Quantification of On-Chain Behavior and Reputation

“DeFi Passport” DeFi Credit Score

“DeFi Passport” is an on-chain credit evaluation system established by ARCx, which encourages users to build reputation in DeFi and make on-chain credit generate its due value. The credit score of each DeFi Passport holder can quantify the creditworthiness of his address on the chain. The credit score will be evaluated by analyzing the historical activity of the holder’s Ethereum address. The range is set from 0 to 999 points. This credit score determines The mortgage rate that the lending application can provide users.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/web3-credit-information-cornerstone-quantification-of-on-chain-behavior-and-reputation/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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