Roadmap to Unsecured DeFi Lending and Credit Scoring

We believe the decentralized identity layer is finally mature enough to enable the next phase of development in DeFi. In an upcoming series of posts we will dive into the components that need to be built to enable unsecured DeFi lending, and lay out our vision for how to get there.

What has Bloom been up to?

For the last two and a half years, Bloom has been working towards the vision of a financial services ecosystem which is open and accessible to all individuals with any amount of inclusion in the traditional credit system.

In our original whitepaper, we outlined a multi-phase approach to achieve a decentralized credit system: First, we needed an identity layer that allowed individuals to receive, store, and share verified attributes about themselves. Next, we built a competitive marketplace to efficiently seek prices for identity verifications. Finally, with the first two pieces in place, we could build a system to aggregate data and build open risk assessment systems.

In April 2018, we built a discovery marketplace based on the BLT token, using a combination of smart contracts and Ethereum Whisper, which enabled vendors and individuals to find each other, in order to facilitate payment for identity verification related work. Shortly thereafter, we engaged in negotiations with data vendors to get the right data into the Bloom ecosystem and built connectors that enabled users to pull in data about their phone numbers, email addresses, watch-list screens, social media, identity documents, income & assets.

First Key Lesson: Ecosystem Data

Attaining vendor participation in Bloom’s marketplace presented challenges. On the one hand, most vendors require custom enterprise contracts with monthly or yearly minimums. On the other hand, the scalable approach to these marketplaces requires transaction-based pricing. The vendors simply didn't understand the potential in a decentralized data marketplace. So, we got to work on building the demand for that data, with the goal of re-introducing the marketplace at the right time.

Second Key Lesson: Built-In User Privacy

By the EthSanFrancisco Hackathon in Fall 2018, Bloom had a fully functional end-to-end flow - Users could sign up, generate a unique identifier, receive credentials, and share with any 3rd party that integrated Bloom’s free-to-use Bloom Share Kit. The overwhelming number of project submissions (Lending Party, SendPut, BlocuSign) at that first hackathon led the Bloom team to expand Bloom’s vision of the identity layer.

Users wanted the ability to selectively disclose identity traits, share data without being tracked by an Ethereum address, and pull in traits we hadn't considered before. Our team responded to that need by building the Selective Disclosure Merkle tree spec.

Third Key Lesson: No Point in Doing This Alone

In February 2019, our team went to EthDenver to share the latest Share Kit improvements and review the next round of feedback and submissions from developers (Check out the workshop video here). When we arrived, we learned the conference was using UPort decentralized identity wallets to register attendees for events. We each downloaded uPort, claimed a credential that verified our email addresses, and shared them by scanning a QR code. We realized that interoperability would have enabled us to register for the events using the Bloom app. Clearly, we needed to expand BloomID to be part of the wider decentralized identity community! This realization compelled the Bloom team to join the Decentralized Identity Foundation and start collaborating with the 100+ other companies working to make decentralized identity a reality.

How has Bloom decentralized the identity layer?

Since Bloom began, we have migrated the protocol to adopt the most open, interoperable, and extensible proposals from the community.

• BloomID → DID (Decentralized Identifier)
• Bloom Attestations → Verifiable Credentials
• Bloom Vault → Encrypted Data Vault & Secure Data Store community
• Bloom Selective Disclosure Merkle Tree -> Mattr BBS signatures (among others)
• Bloom Attestation Smart Contracts → W3C RevocationList2020 spec (among others)
• Bloom Share Kit → Presentation Exchange Specification & Credential Handler API (CHAPI)
• Bloom Share Kit Payload → Verifiable Presentations

More than 60 DID methods have been invented, none by Bloom. Bloom products have adopted the Element specification which is supported by multiple companies and is based on a protocol called Sidetree, maintained by Transmute and Microsoft, among others.

Why do we think the identity layer is ready?

The decentralized identity space is rapidly maturing. Additionally, developer tooling is becoming more and more accessible. The following examples illustrate an industry shift to make decentralized identity significantly more approachable for companies

• Tutorial from Microsoft on generating DIDs & Verifiable Credentials using Azure
• Mattr tutorial for issuing credentials

What is the role of the Bloom App?

Think of the Bloom App as your DeFi credit utility. We aim to provide users with the best on-ramp experience to DeFi with vetted service providers, and access to all the data you need to get started. We want to open up the world of DeFi savings & lending products to traditional users. That's why in the app today, you'll find an experience that is familiar and close to many other free credit monitoring applications, with a live integration with TransUnion for credit scoring, and breach monitoring powered by Have I Been Pwned.

Why isn't there already an affiliate marketplace in the app?

Some users may remember we briefly had a BloomID based marketplace in the app, but restrictions from Apple forced us to move this online. We will be revamping our approach to this marketplace with instant onboarding opportunities for users, in a way that also allows us to stay within Apple's guidelines.

What do we need to make it happen?

We need to call on all of our early partnerships from the early days of crypto, as well as newer companies that are working towards the vision of accessible DeFi products for consumers like Teller.

At the same time we have prepared ourselves for the next step

We have built the first specification & reference implementation for a Verifiable Credential Aggregator (BloomIQ) that solves the issue of user controlled aggregation without self-censoring negative signals. In an upcoming series of DeFi related posts, we will expand on BloomIQ and how we plan to roll it as part of our journey to enabled unsecured DeFi loans and credit-based crypto on-ramps.