- The new DeFI Passport – ‘Sapphire V3’ will allow users to pseudonymously build and verify their credit reputation on-chain.
- Low collateral loans and high-yield farms are expected to be offered to users with high credit scores through several DeFi protocol integrations.
- Arcx has so far managed to raise $1.3 trillion from top crypto investors across the globe.
Arcx has recently announced Sapphire V3, which is set to allow users to pseudonymously build and verify their reputation on-chain. The launch is set to score users on a scale between 0 and 1,000, besides rewarding “reputation-building” and enabling on-chain identity curation into DeFi.
Why the DeFi Passport?
According to the Infinite Rehypothecation DeFi Protocol Arcx, “protocols left to treat every user the same, occasionally giving preferential consideration to wallet size, institutional backing, or restrictive KYC.”
The newly launched passport Sapphire is set to be integrated onto several DeFi protocols, thus opening avenues of “low collateral loans and high-yield farms”, aimed at users with high credit scores. At the same time, it could boost the emerging sector of DeFi-powered under-guaranteed loans.
The DeFi passport refers to an extension that enabled syncing of all on-chain transaction histories across the blockchain distributed ledger in a verifiable manner. The transaction histories could be spread across trading data, liquidity providing, governance participation, NFT creation and more.
The CEO and co-founder of under-secured loan protocol Maple Finance, Sidney Powell, recently stated that the Sapphire DeFi passport would contribute significantly to bringing collateralized loans closer for retail DeFi users.
“There is no doubt that stickier reputations and identities would be positive for retail under-collateralized loans,” he says, but also adds that the user of zero-knowledge proofs might end up bolstering the passport’s adoption “by encouraging users to share off-chain transformation about themselves in the confidence that they maintain confidentiality.”
According to Powell, Arcx’s passport must take a loan’s “affordability” into account. “An address may have a great record of repaying $10k loans on Compound, but how creditworthy would they be on a $250k loan? This is something Arcx can address over time with more data,” Powell mentioned to the Cointelegraph.
What the Future Holds
Shortly, Arcx hopes to take in individual scores for evaluation, spanning a wide range of criteria, such as their “Airdrop Score” and “Yield Farming Score”. These parameters would help estimate the probability of an address holding onto airdropped or farms tokens over the longer terms.
The protocol is also targeting “Governance” and “Trader” scores to assess participation and verification respectively. Arcx has already managed to raise $1.3 trillion from top crypto investors such as Dragonfly Capital and Scalar Capital, leading to total values over $8.2 million. As the global financial system leans more and more towards DeFi in the future, it is going to take a lot more than the present pseudonymous systems, and Arcx seems to be working on exactly that.