Credit Score-Based Lending System On the Ethereum Platform

Abstract

Traditional banking systems act as intermediaries, assessing risks and profiting from interest rate differentials. Credit scores, provided by trusted bureaus, are commonly used to evaluate the creditworthiness of borrowers. Cryptocurrencies have emerged as a significant and innovative medium due to their decentralized nature, operating without reliance on a central authority, such as a government.This report describes a project to implement the Autonomous Lending system on the Ethereum Platform (ALOE), as proposed in [1], aiming to seamlessly integrate traditional credit scoring methodologies for evaluating a borrower's risk of default. The objective of this project report is to establish a robust understanding of cryptocurrencies and the Ethereum platform and describe the implementation of pivotal components of the ALOE system, as presented by Austin, Potika, and Pollett in 2023. Specifically, the report aims to incorporate essential functionalities of the Credit Bureau Smart Contract (CBSC). This entails the creation of a Notary tasked with verifying borrowers using real-world FICO scores, SSNs, and Ethereum Addresses. The Notary further divides the user's identityamong various auditors and invokes the initializeLedger function to establish a credit score for the borrower. The CBSC plays a pivotal role in connecting lenders and borrowers. Finally, in cases of loan repayment failure, lenders have the option to engage auditors to disclose the client's identity.