Lending has a crucial role in the crypto markets. It allows holders of crypto to earn interest on their assets and it allows borrowing firms to access the capital they need to finance their activities. The recent failures of several crypto lending firms has shown, however, that existing methods for evaluating counterparty credit risk are less than optimal.
That is where Credora platform steps in. The company, which was founded in 2019 as X-Margin, has developed an innovative method for real-time privacy-preserving credit evaluations that facilitate transparent, competitive and efficient crypto credit markets.
The name, Credora, the credit oracle, aligns with the underlying technology and vision for the company's future. Credora’s platform is a provably neutral and private arbitrator of a borrower's risk, able to evaluate real-time risk without anyone (including Credora) accessing the underlying sensitive data. The criticality of understanding counterparty credit risk has been illuminated by recent market events, emphasizing the need for real-time risk monitoring. Credora’s integrations with DeFi and CeFi partners will continue to power data-driven lending and facilitate efficient credit markets for borrowers and lenders. In addition, Credora’s technology will help lay the foundation for a new standard of credit evaluation - transparent methodologies, private data.
Credora’s Zero-Knowledge Proofs
Zero-Knowledge Proofs (ZK Proofs) are used throughout the crypto ecosystem but are typically for scaling blockchains and proving binary outcomes (i.e. if a transaction was valid). Credora’s revolutionary ZK proofs instead validate the privacy, neutrality and integrity of real-time risk computations on borrowers. This enables a lender to validate a borrower’s creditworthiness, using Credora as a provably neutral arbitrator of risk.
Oracles in crypto generally deliver public data on-chain, and validate submissions through consensus across multiple nodes. The fundamental innovation of the Credora solution is that it preserves the privacy of users’ data while running verifiable real-time computations. The fact the data has to remain private rules out consensus as a viable solution to validating risk computations, and so Credora leverages a combination of private computation architecture, and cryptographic proofs. Private computations run in secure Trusted Execution Environments (TEEs). Credora then cryptographically proves that those TEEs are indeed completely private and running the calculations specified, removing the need to ‘trust’ the TEE and operator. Credora’s platform is a novel innovation that takes this one step further. They allow you to privately run computations of much greater complexity at scale while guaranteeing that those computations are neutral and private. This groundbreaking technology can be the foundation for more transparent and efficient credit markets.
What does that mean for Lenders?
The conventional method of evaluating credit in crypto is to analyze static data, like financial statements including balance sheets. They represent a company's financial health at a particular moment in time, and these statements are not standardized across the industry or can lack detail, especially in crypto. In addition, the statements are usually internally prepared financials, which can often dampen the confidence in their accuracy.
With Credora, lenders can use real-time metrics in the credit evaluation and can feel more confident when the market is volatile since they can quickly validate borrowers' liquidity and assess the exposure.
Historically, the only way to validate the creditworthiness of borrowers was to recall loans, which carries a significant cost. Instead, lenders can now rely on risk monitoring to manage their portfolios, allowing them to keep loans active and expand their lending book for specific creditworthy borrowers.
What does that mean for Borrowers?
Borrowers benefit from Credora’s technology by being able to prove their creditworthiness in a private way, offering operational efficiencies across sharing KYC, financials and real-time risk sharing in addition to cost efficiencies when tapping into a broader set of lenders. Efficient and competitive lending boosts borrowers' bottom line and allows them to focus on investment strategies. The transparency between borrower and lender ensures liquidity is not drained from the system in times of stress.
Credora services have a proven track record across various DeFi applications and CeFi venues. Credora’s operational efficiencies and thorough credit evaluations enable unparalleled transparency in real-time. The technology is utilized to enable transparency around a borrower's credit risk on Maple, Anchorage, Clearpool, Atlendis, BlockFi, dAMM, Ribbon, Ledn, Cega, and others.
During the recent market downturn, Credora’s real-time risk monitoring performed as intended, and Credora was able to track borrowers’ risk and liquidity through the market volatility.
The risk monitoring insights added transparency and provided a foundation for data-driven and focused conversations between lenders and borrowers, confirming their creditworthiness and ability to meet obligations for interest payments and future principal repayments. Real-time data allowed lenders using Credora to call back loans sooner when a borrower was distressed, and allowed them to be more aggressive with their lending to provably stable borrowers, helping them risk manage and maximize revenues.
The Future of Crypto Lending
The current lending market structure in crypto has failed. The opaque and uncompetitive principal lender model has proven to be an inefficient solution to facilitate credit in the space - pushing the market towards a more transparent and competitive paradigm. Credora believes that robust solutions for managing counterparty credit risk is one aspect needed for a stable and liquid ecosystem, allowing it to build innovative businesses on disintermediated rails and attract institutional investors . Credora is willing to work with industry leaders to help evolve the current standards around credit in the crypto industry, leveraging the technology it is built upon to create a new benchmark for the broader credit market.
Credora enables data-driven and transparent lending across CeFi and DeFi. The team has developed private credit infrastructure that evaluates the real-time creditworthiness of borrowers while protecting sensitive data. To date, Credora has facilitated $800m+ in uncollateralized loans across 100+ borrowers & lenders and can help well-capitalized, risk-managed borrowers borrow transparently and securely. Credora currently monitors over $4 billion of borrower assets with coverage across most CeFi venues while covering DeFi and staking activity from 14 EVM compatible chains and Solana. Credora (X-Margin) raised $8 million in a Series A funding round backed by leading digital asset investors. For more information on Credora, please visit credora.io.
- Website: Credora.io
- Medium: Credora
- Twitter: @CredoraPlatform
- LinkedIn: Credora
- Gitbook: Credora Privacy Preserving Architecture