Chelo Funding Request: Credit Scoring
Proposal Summary
Chelo funding request $48k USDC to fund a 16 week stakeholder driven development to create an on-chain credit rating.
Proposal description
One of the main obstacles that Web3 faces right now is the inability to capitalize on the value that on-chain reputation has for the owner of a wallet.
We propose combining a suite of already available tooling to solve real world challenges for unbanked individuals to address challenges including loan granting by DAOs.
DAOs are much more than the “new limited companies”; the community bonding, aligned purpose and ability to issue their own tokens give them a structural power that has not been seen before. We want to help them to unleash that power in a smart way.
Most DAOs have idle treasuries, why not gain financial interest with tools that help build a community?
DAOs should be a two-way street, where they have the ability to engage with products to help their community thrive. Financial products for their community are an obvious use of their resources, but in order to use them in a smart way, we need to provide them with risk assessment and rating tools, as well as plug-and-play protocols for deployment. We are solving for that.
Also many proposals do not integrate real-world stakeholders in to the process, and suffer from overly-idealistic considerations. In this proposal we specifically integrate low-income bankless or under-banked stakeholders who will be able to leverage these tools from a need-based perspective, vs a web3 enthusiast perspective. We believe that closely integrating this process - which necessarily includes legal advice as well as technical advice to support the users - will lead to both lateral adoption through boilerplate mechanisms, as well as vertical integration through the value of real-world adoption.
This proposal has the potential to significantly grow the number of active DAOs on the Aragon Network by establishing a model to serve unions and communities and supports the overall purpose of the DAO defined in the Aragon Network Charter.
Proposal
1.Rationale
This proposal attempts to address a critical issue – on-chain credit score – by focusing on the needs of real-world users for non-collateralized loans, using their on-chain activity as credit score.
The global personal loan market size was valued at $47.79 billion in 2020 and is projected to reach $719.31 by 2030, growing at a CAGR of 31.7% from 2021 to 2030. In the current space of Web3 it is impossible (or just very hard) to get non-collateralized loans. For this to be possible, it is necessary to have a credit-scoring system to allow smart contracts and DAOs to decide whether to lend or not.
- Objectives
We propose to provide the following solutions to:
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On chain credit-score: Data processing of loans given to users to get valuable information about their probability of paying loans. This information should be available on-chain through smart contracts.
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Secure access on chain to this credit-score: Develop ways to access this credit-score on chain through smart-contracts and/or oracles securely. The process of updating a user’s credit-score must also be secure and tamper-proof.
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Trustful data: Create open and reliable information about web3 users’ credit scores. This information should be accessible and verifiable at all times.
Tools Applied & Strategic Ecosystem Alignment:
- Gitcoin Passport & BrightID: Creates anonymous, decentralized, and unique identity with strong anti-sybil security for web3 users. This will be used to differentiate user’s credit score and provides a proof-of-concept for future Decentralized ID (DID) work
- EVM CRISPR: Tool to create transactions with Aragon DAOs
- Kiva.org: Has public data snapshots about loans created with their product.
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Chainlink: Their oracle system may be used to bring off chain computations on chain
*Swollet: A learn-to-earn software to help participants earn their credit scores
Achieved to date:
- Lending protocol to create non-collateralized loans through Aragon and Gnosis safe (Snapshot) based DAOs
- Gitcoin passport: has been integrated with over 20 “stamp” providers and is a WC3 conformant DID solution
- Notebooklabs.xyz has already the fractionalized KYC identity on a Demo stage
- Chainlink oracles: currently, we have a basic example of how the off-chain/on-chain data transfer should work.
- Swollet.com : Has app in Google and iOS store- content can be added and tokenized results are available
- Proposed Deliverables and duration
Deliverable | Description | # Weeks | Cost |
---|---|---|---|
Gitcoin Passport integration with Aragon | DID integration such that a display for users is available | 4 | 8k |
Notebooklabs.xyz Gitcoin Passport integration modified UI + smart contract | Work with identity management in our contracts and interface | 4 | 5k |
Data for ML modeling de-identified data from raincard.xyz or other off-ramp tool such as nucleus | Aragon dTech will ensure that any off-ramp data is available for open data science review after it is sufficiently de-identified so as not to cause any risk to users. | 4 | 0 |
Chainlink (or any oracle to bring data on-chain) chainlink integration | Use Chainlink (or any oracle service in case after testing chainlink isn’t suitable for our work) to allow our contracts to use user’s credit-score | 3 | 5k |
Contracts auditing audited contract | Before getting into production, it’s necessary to audit our system. The cost and time depends on the audit firm and final system’s complexity. The auditor firm will be chosen on the best cost / firm reliability. | 3-4 (est.) | [15]k (est.) |
User Testing funded through a learn-to-earn model. 5 classes with 10 users | To address significant trust issues we propose rewarding users in a learn-to-earn project using Swollet.com and training provided by the Piedmont Housing Alliance to test our system and provide qualified feedback. This will underpin proof of concept, improve product and help establish trust. This user testing will also provide real-world loan data for our ml model. | 4 | 5k |
LexDAO Clinic’s “House of Bestape” review and support Min. 2 meetings | LexDAO’s House of Bestape will provide email support to help users of the Chelo product in the real world as well as host 2-3 open meetings to engage with the Chelo finance users | 8 | 5k |
- Working Team
Gerardo Lemus | Data science TradFi & Chelo Team
Jose Valdovinos | Business management Chelo Team
Rafael Contreras | Full stack dev & Chelo Team
Grant Schneider | Upstart VP of ML modeling
Aragon dTech | Technical support, documentation, community engagement liaisons and stewards
LexDAO Clinic’s House of Bestape | Legal support, community engagement, liaisons and stewards
DhruvM#6418| Notebook Labs
Felipe Novaes Rocha#2364 | 1Hive dev UI/UX
billyjitsu#3865 | Lead Dev 1Hive NFBeez & Solidity dev
Dave Norris| Piedmont Housing Alliance
- Limitations and Risks
- Low user response: Users that want to stay anonymous won’t use Notebook human verification
- Technical barriers may lower director engagement. To reduce this, we will refer to a “mid-knowledge” user.
- Lending contracts and future modifications need to be audited
- Single point of failure on the credit score server. We may evaluate a decentralized system (like IPFS, or storj) or qri.io for storage depending on security considerations.
- Some users and DAOs might prefer a more decentralized credit score system
- Funding Request
We are asking for a total of $48k which will be used:
- 18k for code integration and boilerplate development
- 10k for Education & Product testing
- 10-15k auditing