This is a great point. Some ways I'm seeing this addressed are in the form of,
- Credit ratings from the real world being moved on chain, both by startups and by established companies (see Fitch report from Oct 21, pay-to-access only).
- Credit ratings across and on chains (https://www.credprotocol.com/) to make sure that a defi OG on eth can have access to collateral on other chains.
- Chainlink and others are working on products like CCIP (https://chain.link/cross-chain) to facilitate creating more systems like this through Oracles vs having to be reinvented.
I would imagine this state of affairs gets better over time.
Why would anyone want their credit history on a public blockchain?
Besides, credit histories often have incorrect information that needs to be corrected, and often creditors will cut you a deal or just be nice ("goodwill adjustments"). Blockchain history is immutable, so how do you handle this? Sure, you can write something to the blockchain that amends an existing entry, but the existing entry is still there to see, even if it was erroneous. I would bet that some lenders would use "has more than $SOME_NUMBER amended entries in history" as a negative signal, even though it's not necessarily fair to characterize them that way.
Hell, negative things on credit reports (in the US) disappear after 7 years. Sure, you can tell lenders to disregard negative things older than 7 years, but do you really expect them to do that?
Great point. I think having this data encrypted on a public system for anyone to verify will lead to much more openness in the ratings system. It has the potential to be a far cry than the black hole the US system is today. I don’t pretend to predict the future, but if you look at the past, any time “open standards” have replaced closed black box systems - it has generally benefitted the end consumer.
With zero knowledge proofs you can prove that you have a specific credit rating or above to anyone who needs to know, without having to reveal what your credit rating is.
Bad marks on credit reports fall off after certain amount of time. you can also dispute it in court or settle it for less than owed. None of which translate to a blockchain and which beg the question of privacy when it comes to collections outside of generic consumer transactions.
- Credit ratings from the real world being moved on chain, both by startups and by established companies (see Fitch report from Oct 21, pay-to-access only).
- Credit ratings across and on chains (https://www.credprotocol.com/) to make sure that a defi OG on eth can have access to collateral on other chains.
- Chainlink and others are working on products like CCIP (https://chain.link/cross-chain) to facilitate creating more systems like this through Oracles vs having to be reinvented.
I would imagine this state of affairs gets better over time.