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Create a trustless system for undercollateralized loans by implementing a credit score system.


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Project Description

Saké aims to create a credit score system for AAVE's credit delegation platform to solve the problem of undercollateralized loans in a trustless manner.

The credit score is represented by an ERC20 token which has to be staked for each loan. The amount of credit tokens staked in a loan contract will impact directly the rate of under-collateralization. In other words, the amount of Credit tokens staked in a loan will determine how many times of your collateral you can borrow. The ERC20 token can't be managed directly by the users. Therefore, the tokens are non-transferable between users since the notion of a credit score --which they represent-- is non transferable as well.

Each loan determines how good or bad the payment process has been in terms of profits for the lenders, and compliance with the terms of the loan. At completion time, the loan contract will then mint or burn Credit tokens for the borrower depending on the previous assessment.

How it's Made

We created a sandbox ecosystem to prove the concept of this project. The sandbox is built of a front end, a lending pool, loan contracts, and an ERC20 token.

The front end is built in javascript and uses the web3 library to interact with blockchain. The front end interacts with the lending pool and serves as the middleman between the borrower and the lending pool. It is what in the traditional financial sector would be considered as a loan officer. Once the borrower has defined the kind of loan he wants to get and accepts the terms of the loan, the front end would communicate with the lending pool to deploy a loan smart contract which will contain the money to be lended.

Every loan smart contract is in charge of calculating the interest to be paid and how to evaluate the performance of the user as a borrower. The loan contract will mint more Credit tokens if the borrower complied with the terms of the loan, and the amount minted will be proportional to the interest paid in the loan. On the other hand, if the borrower doesn't comply with the terms, the loan contract will burn some or all Credit tokens staked.

The Saké lending pool will send all the funds into AAVE's lending pool to earn interests while not being used.

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