Authors: Fakhul Miah (CEO), Kevin Wang (CTO), Sunny Feng Han (Board Advisor)
Recently, “Decentralized Society: Finding Web3’s Soul” was published by Microsoft researcher Glen Weyl, Puja Ohlhaver of Flashbots Ltd., and Vitalik Buterin of Ethereum Foundation. The paper discussed the concept of Soulbound Tokens (SBT), which share many of the same fundamental aspects and utility as CreDA’s cNFT (Credit NFT), which was launched last year to solve several key issues within the Crypto-industry:
- Currently the Web3 industry leverages transferable cryptographic tokens and financial assets to fuel its economy. Whilst this has proven to be successful and enabled a wide range of innovation, current limitations have led to hyper-financialization, over speculation, short-termism, and illicit activities, which threaten further adoption of Web3.
- The majority of crypto projects and communities (DAOs) lack sufficient decentralization mechanisms or the ability to fully realize the power of consensus-based protocols such as proof-of-work (POW) or proof-of-stake (POS). This is due to most of the computing power or tokens being hoarded by a few, mitigating the effect of Sybil attack resistance.
- Crypto specific business models such as decentralized finance (DeFi) are significantly limited and introduce their own barriers to industry through the inability to offer credit-based economies (credibility, trust, and historic behavior) e.g., the lack of undercollateralized lending will hold back mass adoption, and make the DeFi dream of ‘banking the underbanked’ impossible.
- The lack of credibility-based identities in Web3 has made it difficult for real-world economic resources to be connected and integrated into a truly decentralized Web3 metaverse. This is a real bottleneck for industry development and adoption.
- For individuals to unlock the full power of owning and controlling their data on Web3, to participate in long term, self-sustainable decentralized social economies, a credibility based ‘Soulbound’ identity is required.
- In the physical world, business transactions and contracts are processed between different parties, e.g., a ‘supplier’ and a ‘buyer’ for goods or services. In certain cases where trust (counterparty risk) between the two parties is not evident, a third trusted party is introduced to function as the guarantee layer, e.g., lawyers holding funds in escrow during a home purchase. The introduction of smart contracts and NFTs within Web3 has replaced the need for the third party, resulting in reduced processing times and costs by removing the ‘middleman’.
However, how do the ‘buyer’ and ‘seller’ in a Web3 economy demonstrate their credibility, responsibility, and legal credentials to begin with, e.g., an individual contracting a lawyer to provide legal services? How does the lawyer demonstrate their credentials in this instance? They do so with SBTs. This is the missing component in creating a fully immersive Web3 economy.
Recently, CreDA, FilDA, Glide and Elacity cooperated to initiate “Credit DAO’’, launching on Elastos Web3 (ESC). The core component of non-transferable but liquid cNFTs (mint credit NFTs using your own on-chain credit score and DID in Web3) is aligned with Vitalik Buterin’s SBTs concept. We believe SBTs will solve several key problems in Web3 and kick off the crypto industry’s next golden development period. CreDA plans to leverage its cNFT technology to build visible SBTs (SBTFace) on BTC, Ethereum, Elastos and many other chains, with initial application scenarios across FilDA, Glide and Elacity.
The idea stemmed from Elastos founder Rong Chen’s vision of “You own your own data.” He ideated the mission of building a decentralized Internet (so called Web3 now) during his time working at the Microsoft Research Institute. Twenty years later, through dedication and arduous work his vision evolved into the Elastos Web3 project.
In August 2019, inspired by Rong Chen’s vision, William Zhijun Zhang, Chief Security Architect of the World Bank, and Long Wang, the then Vice President of Tencent Cloud, launched the Data Capitalization Campaign and Leo community manifesto in Shenzhen, China. The Manifesto was necessitated by the severe unequal distribution of resources.
With the emergence of the Internet, especially the mobile Internet, human beings have a new resource — big data. If the ownership of data can be authorized through technologies such as blockchain and be fully protected through a trusted computing environment, and data transactions can be automatically executed online, the individual credit limit will increase, and transactions stymied by poverty issues can be conducted. Individual data can also be used in artificial intelligence training to generate value and wealth, and some ideas and inventions far from the mainstream can be converted into individual assets through data. These developments will decrease the gap between the rich and the poor brought about by informatization and build a new foundation to steadily develop a more informatized society.
To fulfil the mission of this campaign, CreDA (evolved from the Leo community), launched the credit oracle project in 2021 to build a decentralized, Soulbound credit score system that leverages a user’s Web3 data, and appointed Fakhul Miah (VP at Morgan Stanley) to become CEO.
CreDA has analyzed over one hundred million blockchain wallet addresses and four billion data points across major blockchains including Ethereum, Arbitrum, BSC, ESC, HECO, OEC, Fantom and Polygon to model Soulbound credit scores. This is a solid foundation to build the Credit DAO and SBTFace (visible SBTs) systems powered by CreDA technology.
Credit DAO
Credit DAO is a CreDA led credit asset management protocol based on ESC through DAO governance, empowering Web3.0. It builds a new standardized DeFi asset flow model using smart contracts to provide credit-based unsecured assets for user relationships in the Web3.0 social graph, in addition to the standard over-collateralized lending services.
Credit DAO’s mission is to bring credit and DAO governance to the realm of on-chain asset management. As a decentralized protocol that redefines asset management based on credit and DAO governance, Credit DAO is bringing much-needed innovation to the traditional financial investment industry. Credit DAO will expand the meaning of new types of asset investment through fully decentralized governance and the introduction of a reputation and reward system for performance. This reputation system provides an arena where anyone can have a say in asset investment management in exchange for a positive contribution to the ecosystem. The decentralized autonomous organization structure will pave the way for users to contribute by providing block-native solutions that harness the power of decentralization, and incentivize the users of Credit DAO to create a value space for co-creation, sharing and win-win outcomes.
ELA is the proposed governance token of Credit DAO, which is used to participate in DeFi, provide liquidity, realize platform governance, and account records, transfers, and payments within more applications in the future. In addition, it will also play more roles in maintaining the overall ecological balance while stabilizing the fluctuation of digital currency values.
Credit DAO is a highly innovative, best-in-class protocol that demonstrates a real use case for Elastos Web3.0 “in the wild” with both real-world and virtual applications. Through integration with Credit DAO, partner platforms such as CreDA, Glide, FilDA and Elacity can differentiate themselves versus competitors, and demonstrate real innovation. We believe that Credit DAO will have a significantly positive impact on the Elastos ecosystem, driving significant adoption across integrated dApps whilst enabling new innovative products and services that do not currently exist in other ecosystems.
Credit DAO is designed to be interoperable, enabling users to take their Soulbound credit score and benefits across the wider metaverse beginning with the Elastos ecosystem.
We aim to achieve this strategic vision in three phases:
Phase 1: Implement ELA-based cNFT (SBTFace) on ESC, the purpose is to gradually accumulate assets and credit data on ESC through DeFi services on the Elastos community.
Phase 2: The unbanked in the world do not have access to banking and financial services due to lack of credit records. Historically, the most primitive credit was established from the social circles of relatives, friends, and acquaintances, which are the cheapest credit resources. Therefore, we will build a “Social Credit Insurance” system powered by CreDA’s Credit Network (cNetwork) so individuals can use their own circle of relatives and friends to get verified on the chain, and start to build up their own decentralized credit rating, thereby reducing the threshold for them to access financial services.
Phase 3: After accumulating a certain number of data assets and data credit groups, we will gradually provide lower cost, more convenient and fast financial services to the entire world as compared to traditional banking services.
Credit DAO Architecture
Step 1: Credit DAO Participants
Any token community, including fungible tokens (FT) and non-fungible tokens (NFT), can be invited to join Credit DAO and customize its own equity rules. These DAO-governed rules will be supported by the cNFT.
Step 2: Mint SBTFace
Users can mint collateral onto their SBTFace (with W3C DID) with both FTs (e.g., ELA) and NFTs (e.g., Elacity NFT). Collateral tokens that are minted then enable users to access privileges within their community whilst also resulting in a higher credit score.
Step 3: DeFi your SBTFace
Based on the Dolphin (DAO FI) powered by FilDA, Credit DAO will offer members NFT mortgage lending functions.
Product Features:
- An independent funding pool, funded by the Credit DAO community
- The borrowing qualification adopts a gated access system (whitelist by SBTFace).
- The loan adopts the mortgage model, but the collateral supports NFT assets in addition to traditional FT assets.
- Providing a DAO governance interface, qualified voters (whitelist) can adjust the price and mortgage rate of collateral through voting.
- When bad debts occur, all depositors share the unmanageable debt losses. Defaulting starts the auction process (one to many), where all the assets minted in the SBTFace (cNFT) will be sold and auctioned and the proceeds are used to repay depositors.
Step: 4 DeFi with your SBTFace
After the SBTFace lending function goes live, Credit DAO will collect the behavioral data and loan activity through the CreDA Credit Oracle to improve the CreDA credit score model. This will enable additional functionality when leveraging the CreDA credit score.
Credit Lending Use Cases:
- Users register their wallets in the Credit DAO community and earn credit points.
- Users can receive extra credit points by participating in activities/tasks in the Credit DAO community.
- Users can mint credit points onto their SBTFace.
- Credit DAO Communities can define the SBTFace privileges through the DAO governance process.
- Users can support community growth by depositing in the Credit Loan Pool.
- Users with sufficient privileges can stake their SBTFace and borrow from the Credit Loan Pool.
- If borrowers repay on time, their credit score will improve.
- If borrowers fail to repay on time, or even have bad debts, they are punished by auctioning the collateral on their SBTFace — negatively impacting their credit score.
SBTFace Architecture
SBTFace minting:
- DID in Web3 (following the W3C DID standard).
- Data from blockchain (signed with your own private key) and off-chain (Twitter, WeChat etc.) controlled by your own accounts.
- Calculating a level by Soulbound credit oracle (CreDA).
SBTFace credit lending
SBTFace (cNFT) benefits in Credit DAO:
- Non-transferable (Soulbound, can only be owned by you).
- Non-fungible (unique, specific to the user).
- Contains a user’s real-time Credit Score/Profile.
- Users can mint tokens (and NFTs) directly onto their SBTFace to use as a form of collateral or proof of ownership and to raise their credit score (unnecessary at first).
- Upgradeable (users can upgrade their SBTFace if they meet certain requirements e.g., credit score, which unlocks additional benefits):
- Free claimable CREDA tokens.
- Increased saving rates from other DeFi.
- Reduced borrow rates from other DeFi.
- Improved liquidation thresholds.
- Increased DAO weight bonus.
- Additional rewards, memberships, and access across partner platforms.
Step 1: Mint your SBTFace by DID and CreDA score
After the SBTFace lending function goes live, Credit DAO will collect the behavioral data in Web3 (authorized by the user’s private key) and loan activity through Credit Oracle to improve the CreDA credit score methodology.
Credit Lending Use Cases:
- Users register their wallets in the Credit DAO community and earn credit points.
- Users can also bind their social accounts (Twitter, WeChat etc.) to their wallets and earn credit points.
- Users can receive extra credit points by participating in activities/tasks in the Credit DAO community and collecting their own social media data (verified by a third party).
- Users can mint credit points onto their SBTFace.
- Credit DAO Communities can define the SBTFace privileges through the DAO governance process.
- Users can support community growth by depositing in the Credit Loan Pool.
- Users with sufficient privileges can stake their SBTFace and borrow from the Credit Loan Pool.
- If borrowers repay on time, their credit score will improve SBTFace.
- If borrowers fail to repay on time, or even have bad debts, they are punished by auctioning the collateral on their SBTFace and their credit scores will be degraded.
Step 2: Credit DAO Participants
Any token community, including FTs and NFTs, can be invited to join Credit DAO and customize its own equity rules, and Credit DAO will add these rules to SBTFace minting.
Step 3: Mint assets into SBTFace
Users can mint SBTFace with FTs and NFTs, for example ELA or Elacity NFT. The tokens minted in the SBTFace will help users to get privileges in their community and higher credit loan levels.
Step 4: DeFi your SBTFace
Based on the Dolphin (DAO FI) Powered by FilDA, Credit DAO will offer members NFT mortgage lending functions.
Product Features:
- Independent funding pool, funded by the Credit DAO community
- The borrowing qualification adopts the access system (whitelist by SBTFace)
- The loan adopts the mortgage loan model, but the collateral supports NFT assets in addition to traditional FT assets
- Providing a DAO governance interface, qualified voters (whitelist) can adjust the price and mortgage rate of collateral through voting.
- When bad debts occur, all depositors share the bad debt losses and start the auction process (one to many), all the assets minted in the SBTs are sold and auctioned to repay depositors.
Since Elastos utilizes more than 50% of Bitcoins hash power, SBTs minted by Elastos are secured by one of the most powerful decentralized computation systems. This acts as a strong cornerstone of development of Web3 SBTs in the future.
How to use SBTFace to help govern and develop the Cyber Republic and Elastos ecosystem?
- CRC voting can be amended from one ELA one vote to one SBTFace one vote, to resist tycoons governing.
- CRC can propose SBTs assessing rubric for Elastos community.
- Elastos can have an SBTFace ranking list issued by CRC and Elacity to encourage positive contributions from members.
- The Elastos community can fund a pool (DPOS 2.0 ELA staking) for member credit loans and the CRC can issue a stable coin based on said pool to support the Elastos ecosystem development.
- SBTFace can receive multiple airdrops from ecosystem projects within Elastos.
CreDA is excited to lead the Credit DAO and SBTFace project with our partners across the Elastos ecosystem.
