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Ask HN: How to issue credit in crypto without collateral

2 points by salimstartup ↗ HN
I think that on the way to adopt crypto - is achieve feature parity with fiat, ie make payments easier, more flexible, add credit methods of payments. Problem: How do you solve for lending in crypto, without collateral, without disclosing user identity

Two considerations that seem to be almost contradicting each other: 1) crypto is about keeping anonymity 2) for credit you would need to evaluate the person you are lending to, and prevent the person from misrepresenting themselves and stay accountable for the loan taken

What are your thoughts?

4 comments

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d_e_solomon
So when loaning money, you're trying to keep a low default rate as possible for the interest rate you're charging. Having collateral and data and identity help protect against the risk of default. If you take those away, you'd have to charge a very high interest rate to cover the risk - thus increasing the risk of default - and it spirals poorly from there.

In the old days before the 1980s for sure, bank loans were done based on relationships - the bank manager knew you and had your business. That worked for some, but many loans that could have been weren't issued due to not having a more industrial process. In this modern era, lending officers can see your credit scores and a bunch of data to evaluate the risk of default. Even though I haven't seen the inside of my bank since 2010, I can easily get a loan based on credit data.

I struggle with why would I want to issue loans without either the data or the relationship. Maybe if you have a way to get a person's collateral and credit data on chain via a proxy, you can use that to issue a loan. But that seems like our existing structure with just extra steps...

salimstartup
Not saying we don’t need to use data. Question is - is there a blockchain solution that would allow to lend, controlling risk, similar to how people do it with digital banks nowadays

In status quo - does the bank really have to know your name and ID? I think no, the banks just need the info about you - how much do you spend, how did you repay previous loans etc? I built some fiat lending scoring engines

For the sake of discussion: - can we use transaction information in blockchain to score? - can we use some kind of credit history on blockchain? - is there a way to make sure a single person doesn’t take too many loans using different addresses? Eg use some identify key, that doesn’t disclose personal info, but makes sure this key unique per user

jqpabc123
Anonymous credit without collateral --- an open invitation to fraud.
salimstartup
Question is - is there information (on the blockchain) that can help us prevent this?

Eg previous history of transactions