Challenges
Polygon DeFi UX Challenge
There are three clear actions which one can take with our project: Borrow, Vouch and Earn. Each page is self-explanatory but includes small explanation.
Launch a real-world lending use case on Huma
We launch our project for close knit social networks (i.e., a group of college friends) who have disparate credit scores. Our project is ready out of box for use in this real-world lending use case.
Spectral.finance's Bounty
Spectral's MACRO score is pivotal in our project to determine who is allowed to borrow, vouch and lend. Specifically, the MACRO score is a major feature in the underwriting model.
A credit line for every wallet
Every wallet which connects to our dApp is given the opportunity to check eligibility for a credit line. Our project focusses on widening access to as many wallets as possible through our social staking system.
Build new signal adapters
In this project, we construct an Underwriter.sol contract which embeds Spectral Finance's on-chain Oracle into the Huma infrastructure.
#BUIDLathon 2023 DeFi Track
Our project aims to widen access to small loans to those with low credit scores but with a network of high reputation people.
Project details
Vouch Finance Protocol.
The aim of the Vouch Finance protocol is to address the prevalence of exclusively overcollateralized on-chain lending protocols.
There is currently considerable risk involved in enabling undercollaterized loans given the lack of accountability, enforceability and general asset volatility. However, undercollaterized debt not only plays a large part in the economy but is also especially important for those who do not have access to a stable financial system or are subject to inefficient bureaucracy.
To preserve the anonymity of the users, keep borrowers accountable and ensure stable returns for liquidity providers, we provided social staking as an alternative system to the current on-chain options.
With social staking you can vouch for other users if their credit score is not high enough to take out a loan, staking your own collateral in the process for potential yields as well as the potential risk of your credit score decreasing if the borrower (your friend) defaults. The rest of the loan is sourced from the liquidity pools within the platform. Those investing in a pool receive a large interest rate relative to the industry standard return to compensate for potential risks. Moreover, they are free to choose what risk they wish to take by choosing an appropriate pool.
Our method: in our underwriting model, we calculate the average risk scores of the borrower and the voucher, the appropriate pool liquidity and the average risk of the pool our model determines the maximum possible loan size and the percentage of it the voucher pays as the collateral. Once the loan is paid out, the borrower receives an increase in their credit score, the voucher - their collateral back plus interest. The pool participants receive a continuous income as the loan is paid out. If the borrower defaults, depending on the size of the loan their credit score is decreased with a possibility of no further lending, the voucher loses access to the collateral and the returns received by the pool are temporarily decreased by a proportionately small amount. Such consequences combine with the general association of the wallets participants use with professional sources of capital such as income, ensuring there is an incentive to pay out the loan.
In the future we hope to increase the granularity of our model, incorporating more variables, expanding the number of available risk pools and improving the general user experience by including account abstraction.
Our protocol is based on the source code provided by Huma Finance and Spectral Finance.