What is: NFCS (Non-fungible credit score) — Credit, Reputation, and Trust token

NFCS (Non-fungible credit score) — Credit, Reputation, and Trust token

DeFi credential for under-collateralized borrowing

RociFi - Under-Collateralized DeFi Credit Protocol

1 Introduction

In order to borrow from RociFi, users need to be credit risk rated by the Protocol’s credit risk scoring (CS) API.

In order to receive a CS, users must mint their Non-fungible Credit Score (NFCS) token first. NFCS is an ERC-721 token that is minted on the Polygon blockchain and is used to verify ownership of the addresses for which the credit risk score (CS) has been generated.

NFCS operates as a credit, reputation, and trust credential that neatly classifies user’s on-chain behavior into an easily interpretable scale from 1–10; with 1 being the most creditworthy and 10 being the least. More details about RociFi’s scoring terminology can be found here.

Multiple addresses can be added, i.e. “bundled” to NFCS. In this case CS is defined based on the aggregate transaction (Tx) history from these addresses. NFCS is immutable once generated.

NFCS operates similarly to credit bureaus like FICO where the score belongs to the user, but the user does not control it.

At this moment RociFi analyzes Tx history of bundled addresses on 4 blockchains: ethereum mainnet, Polygon, BSC and Avalanche. In the near future, RociFi will analyze all bundled address’ activity on all major EVM-compatible chains.

Figure 1. Final page of the NFCS minting flow. Scores 1–6 give access to the under-collateralized lending

2 How NFCS works

2.1 The flow

NFCS can be created on Polygon in a few seconds with a couple simple steps:

• Enter RociFi app and connect your Metamask or Ledger HW wallet
• Add one or multiple addresses by switching ‘connected’ accounts in Metamask
• Sign a small transaction to prove ownership of said addresses
• Click on start minting NFCS, this process will kick-off generating CS
• Now NFCS in minted in the wallet RociFi and is ready to be used for borrowing

Figure 2. NFCS minting process

2.2 Built-in limitations of the NFCS

In order to reduce risk of fraud and limit bad actors, some constraints of NFCS usage must be put in place. These constraints can be later reviewed and voted to be amended or abolished by RociFi DAO. The limitations currently in place are:

1. Address/accounts that are already part of an NFCS bundle cannot be used in another NFCS bundle
2. Users must confirm ownership of each address added to the bundle via nonce signature
3. Users can’t have more than one NFCS in their wallet.
4. Credit can be accessed only from the ‘Primary’ address in the bundle
5. NFCS is not transferable
6. Later versions of NFCS: users can add new addresses to the bundle but cannot remove them

Figure 3. Characteristics of NFCS

2.3 ERC-721 token

ERC-721 NFT was chosen as technical solution for these reasons:

• Decoupling data collection and data ownership from the credit scoring and credit issuing processes
• Decentralizing scoring: various credit-scoring backends can score bundled addresses independently
• Ability for a borrower to apply for credit (or access other use cases that operate with on-chain reputation) on other DeFi platforms
• Creating a future-proof platform for developing other use cases in the DeFi ecosystem that require proof of multiple address ownership (e.g. ‘Degen score’, ‘farming score’ etc)
• Elegant user experience solution in the spirit of Web3.0 concepts (“I own NFT passport so I own these addresses”)

2.4 Bundling of addresses

There can be at least 4 different scenarios in terms of the types of addresses that can be united into the NFCS bundle.

Figure 4. Adding multiple addresses to the bundle

Initial launch, phase 1:

• One address on the ethereum blockchain (1 seed phrase) accessed through Metamask with several connected wallet accounts → requires one log in to Metamask (currently supported case)

Beyond phase 1:

• Several ethereum addresses (each has own seed phrase) accessed through Metamask → requires several authentications to Metamask
• Several ethereum addresses (each has own seed phrase) accessed through different wallet providers → requires several authentications into different wallet providers
• Addresses on various blockchains accessed through Metamask and other wallet providers e.g. a user could connect transaction history on Polygon, Avalanche and Ethereum into one bundle.

2.5 Primary address

Credit can be accessed only via the address that is marked as ‘Primary’ in the bundle. In the case (A) above, the address that has been selected as ‘Primary’ in Metamask, will be automatically marked as ‘Primary’ in the bundle.

3 RociFi Credit Scoring

RociFi’s credit scoring engine is the underwriting flow connecting 4 components:

• Fraud Database: Borrower address(es) are scanned through our DB of hundreds of thousands of known fraudulent actors, e.g. Phishing, Hacks, Scams etc.
• Fraud Score Analytics: Borrower address(es) scored as the probability (likelihood) that they are in fact fraudulent, but haven’t been flagged yet. 1 is the lowest risk and 10 is the highest.
• DID/Web3 Score: Borrower address(es) are scored for high reputation and monetary value. Each address is assigned a Rep Score where 1 is the best and 10 is the worst.
• Credit score analytics: Borrower address(es) scored as the probability (likelihood) that they will default on the loan. 1 is the lowest risk and 10 is the highest.

Figure 5. Components of RociFi Credit Scoring

4 NFCS ecosystem

4.1 NFCS utility

RociFi’s NFCS and linked Credit Score API can be used by other DeFi protocols as the ‘Trust’ and ‘Value’ score that can be used to curate custom offerings.

Here are a few directions on how NFCS can be used by DeFi protocols as a cross-chain interoperable NFT-based identity solution:

1. Enabling under-collateralized loans
2. Protecting from fraud and scam
3. Using NFCS-based reputation for Sybil resistance in DAO elections
4. Balancing DAO voting power according to NFCS reputation
5. Prioritizing airdrops and waitlists to quality users

As recently announced, RociFi score badges will be visible on users’ profile pages on Cyberconnect, giving followers information about the credit, reputation, and trust score of various accounts.

Figure 6. RociFi ecosystem: NFCS badge visible on Cyberconnect

4.2 Why NFCS is a valuable DeFi credential

In order to provide maximum utility to its users, the NFCS has been built to incorporate credit, reputation, and trust into one token by using the following principles:

• NFCS are for everyone: they are free to mint and there is no pre-screening.
• NFCS are instant: even for addresses with thousands of transactions, the NFCS minting and CS generation process takes a matter of seconds due to RociFi’s carefully optimized data engineering process.
• NFCS are always up-to-date: Users’ credit scores are continuously recalculated in the background of their wallet activity (e.g. MetaMask) based on new activities in the addresses connected to the NFCS.

Nearly 13000 NFCS have been minted to-date on RociFi’s test network using real-time production on-chain data.

Figure 7. NFCS contract and NFCS minting transactions visible on Etherscan

Summary

RociFi is building the first DeFi credential that verifies credit, reputation, and trust in one ERC-721 token — NFCS. The NFCS is free, fast, and easy to mint. It is also immutable, non-transferable, and continuously updated.

As NFCS ownership blossoms, greater integration into the broader Web3 and DeFi ecosystems will drive utility beyond under-collateralized lending with our CyberConnect and Link3 partnership offering the first example.

RociFi — under-collateralized credit for Web3

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