RociFi is a revolutionarily unique, primitive, layer 1, peer-to-peer, multi-chain protocol that lives and breathes in the Defi space by providing zero & under-collateralized loans. Even though Defi summer is long gone and crypto has been hit hard recently, the sector is still attracting big money and some intelligent minds. Getting things off to a solid start in November of 2021, RociFi Labs raised venture capital to the tune of $2.7 million from a handful of different investors, including Arrington Capital and Nexo.
The protocol aims to create a unique way for one to gain access to borrowing and lending by bringing your credit score on-chain while verifying credit, reputation, and trust.
First, you create a Non-Fungible Credit Score, an NFCS. All you need is a Metamask wallet or a compatible cold storage device like the Ledger Hard Wallet to get started and receive your score.
The NFCS is minted as an ERC-721 token and connects to the address where the credit score originates. The score will be constantly updated, immutable, and non-transferable, so no; you can’t trade, lend out or sell your score, but you can burn it if you no longer wish to use it for any reason.
Payment, bond, and investor contracts are the foundation for the three main smart contract parameters used here to communicate with each other. Debt, bond, and asset tokens are the main token categories used to operate the contracts. Also, for reference and clarity, the actors in this play would be the borrowers, lenders, and liquidators.
Once an NFCS has been calculated, a score from (1-10), with 1 being the best possible score and 10 being the worst possible score is given. Scores (1-6) gain access to under-collateralized loans, while scores (7-10) are solely granted access to over-collateralized loans. This is based on risk factors derived from machine learning, transaction history, and decentralized identity (DIDs) analysis. The result dictates rates and what you will be able to do with your score within RociFi.
I learned about this project by speaking with one of the quants on the RociFi team. Through that conversation, I learned about one of the most exciting aspects of the protocol. And that is how the social aspect of this protocol comes into play. What stood out to me is the fact that RociFi will use Twitter, GitHub, DAO participation, and NFT ownership to help determine overall credit worthiness. This is important as the recourse is if you default on your loan, it will be advertised across social media and other different outlets/platforms within the community.
I asked quite a few questions and was able to gain some good insights. One that came to mind was how RociFi plans to deal with issues regarding fake followers, bots, and things of that nature that may give a misleading Web3 presence. I was told that measures would be taken to mitigate this as a potential issue for the social aspect of the protocol.
So, if your Web3 reputation means a lot to you, the user will likely not want to default on their loan. By default, this adds a layer of security. Even though this space is often anonymous, most people will not want to ruin their Web3 identity and start over from scratch as it may have a lot of built-up and or potential value.
Can you connect multiple addresses to one NFCS? The answer is yes, you can. In this case, the overall score is aggregated from the history of each address linked. Note that you might want to be conscious of the transaction history for each wallet connected, as having minimal previous transactions can water down your score.
As stated on their website, roci.fi, you can lend up to 30% APY and can borrow from 8% APR with reduced collateral. For lenders, a solid 80% of the revenue goes to depositors. There is no deposit lockup either. The controlled risk is facilitated with a mix of different protection strategies, while the measured risk is managed with the borrowers’ fraud, credit, and reputation risk scores. Regarding borrower types, it seems RociFi aims to attract a mix of institutional and retail participants.
Here is what’s in it for borrowers, depending on your NFCS. Instant no-KYC under-collateralized loans, the lowest collateral ratio on the market between (0%-90%), and they have fixed APR/duration loans. Liquidation protection is available and an option for a grace period for institutional borrowers. Their loan products are custom-made by providing variations in loan durations and collateral while offering customizable payment plans.
What assets are compatible with the protocol? Currently, ETH, USDC, USDT, DAI, and WBTC are the only approved assets. You can find RociFi being used on the Kovan test net with plans to launch on Polygon later this June. Kovan is a proof of authority test network used for Ethereum-based projects before they make it onto the Ethereum Mainnet.
As of early June, over 13 thousand NFCS have been minted, and that number is expected to multiply once RociFi is launched on Polygon. RociFi is currently compatible with Polygon, Binance Smart Chain, and Avalanche blockchains. There are plans for other EVM-compatible chains to be included as things progress. In the future, RociFi aims to become a functional DAO and bring decision-making to the community. RociFi’s most recent Testnet V2 interface looks attractive, smooth, and easy to use from a UI/UX perspective.
This project is essential as it levels the playing field for credit scoring by using data points other than property/debt metrics that traditional entities typically and almost solely use.
Ultimately this brings more potential energy to the space and makes for more efficient use of funds without having to lock up mass amounts of capital. Imagine if some of the $40 billion locked up in Defi could still be utilized.
One of the marvelous things with RociFi is that they are essentially changing the game by creating a decentralized bond market. This aspect is excellent as it moves away from the pawn shop vibe many traditional Defi projects operate. Time will tell how network adoption goes though the team has lofty goals to onboard 1 billion users and 1 trillion dollars to Defi. As a layer 1 protocol, RociFi sure has the potential to build a base and reach its goals by having other entities use them as a trusted source for NFCSs. When we have trust, we don’t need traditional stores of value to back up a currency.