Credit Attestation Service
Premium MORE markets require the definition and configuration of a credit attestation service. A credit attestation service is a system designed to evaluate, verify, and publish the creditworthiness or financial reliability of entities such as individuals, businesses, protocols and applications. These services leverage the transparency and immutability of the blockchain to provide a dynamic, real-time assessment of an entity's financial health and credibility.
Credit attestation services gather data from various sources to assess borrowers. They can use on-chain data, either with or without permission, as well as off-chain data from traditional financial institutions and real-world assets (RWA). Typically, these services combine both types of data to generate a quantitative score for each borrower.
The key components and functionalities of an on-chain credit attestation service include:
Proof of Assets: This involves the verification of ownership and valuation of assets with a transparent market value. The service confirms that the assets exist and are owned by the entity claiming them, akin to auditing.
Quantification of Credibility: These services apply algorithms or models to assess the credit risk associated with an entity based on their financial activities and asset holdings. This may include analyzing transaction histories, debt levels, asset liquidity, and counterpart exposures.
Publication of Proofs or Scores: Similar to credit scores in traditional finance (TradFi), such as those provided by Standard & Poor’s (S&P), this service publishes credibility scores or proof certificates in the form of on-chain attestations using the Ethereum Attestation Service. These scores provide transparent access enabling other parties to make informed decisions regarding credit.
Dynamic and real-time: These services continuously monitor and update the credit scores or proofs as the entity’s financial position changes. This includes real-time updates triggered by transactions, market fluctuations, or changes in asset values, ensuring that the credit information remains current and accurate.
Interoperability and Integration: On-chain credit attestation services are designed to be interoperable with various blockchain protocols and financial platforms. This enables seamless integration and utilization of credit data across different DeFi applications and services.
Credit attestation services play a critical role in determining the creditworthiness of borrowers and the ability of lenders to assess risk, bridging the gap between traditional credit systems and the efficiency and transparency provided by MORE Markets.
Credit Attestations on MORE Markets
When a new premium market is created, the market creator specifies the address of a credit attestation service. The service evaluates which wallets have additional borrowing capacity. Each credit attestation associates a wallet address with a score ranging from 0 to 1,000, which determines that wallet's borrowing capacity.
When creating a market, users must determine the LLTVs associated with credit score ranges. In the example below, the lowest range allows for 100% LLTV, and all ranges above this range are associated with LLTVs that facilitate undercollateralized loans. Also in this example, the the interest rate multiplier has been set to 2x at the maximum LLTV, which applies to all premium LLTV ranges.
LLTV0-200: 100%
LLTV201-400: 125%
LLTV401-600: 150%
LLTV601-800: 175%
LLTV801-1000: 200%
Because significant variance in the measurement of risk can exist between credit attestation services, users are strongly encouraged to assess the quality of credit assessments and the reputation of publishers before engaging in a market.
To simplify the process of choosing a credit attestation service or developing a custom one, the protocol has pre-approved and whitelisted an initial trusted service, the Credora Attestation Service. Additional services can be approved in the future through the protocol's decentralized governance framework.
Real-time Credit Score Updates
Because a borrower's risk profile can change over time, it is important that the credit attestation service provide accurate scores based on current data.
Whenever a borrower takes any action on a loan, MORE Markets evaluates their credit score in real-time using the market's assigned credit attestation service.
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