Credit Score Evaluation

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Whitepaper
Introduction
Architecture
Cross-chain Knowledge Graph
Cross-chain Identification
Credit Score Evaluation
Collateralized NFTs
Tokenomics
Addditional Documentation
Credit Score Evaluation
In the financial sector, a credit score is a value that represents the creditworthiness of an individual; the higher the score, the better a borrower looks to potential lenders. Credit score evaluation is a distinctive technique that differentiates TRAVA.FINANCE and other decentralized lending approaches. TRAVA.FINANCE aggregates and analyzes all transactions of blockchain objects (e.g., user, wallet address, digital asset) on multiple networks. TRAVA.FINANCE then establishes links among them and evaluates their credit score in the most objective and transparent manner.
TRAVA.FINANCE uses credit scores to ensure the safety of the lending process. Pool owners and lenders can rate borrowers’ credit and eliminate fraudulent accounts to increase capital efficiency and reduce the risk of bad debt. Based on the credit scores, they can determine the maximum Loan-To-Value ratio for borrowers. Borrowers with high credit scores get preferential treatment; they can borrow cryptos with more favorable interest rates and Loan-To-Value ratios. Credit scores provide an incentive for users to (i) hold their wallet addresses as long as possible and keep them clean, (ii) perform the cross-chain identification protocol to interlink their addresses, (iii) perform more transactions inside and outside TRAVA.FINANCE, and so on. This increases crypto liquidity and fosters the growth of the DeFi system.
The credit score evaluation in TRAVA.FINANCE is primarily based on on-chain data. At present, we collect, enrich, and analyze Binance Smart Chain transactions, including the native transferring transactions and the transactions to deposit, withdraw, repay, and borrow tokens generated from Binance Smart Chain lending DApps.
TRAVA.FINANCE evaluates credit scores for both wallet addresses and other digital assets. Wallet addresses operated for a long time with good transaction history (e.g., an address that has transactions with many other addresses, always pays debts on time, and performs transactions frequently) will have a high credit score. Pool owners can use credit scores as a criterion to select competent wallet addresses for their pool’s liquidity providers.
The credit rating of digital assets helps pool owners and liquid providers to minimize liquidity risk. TRAVA.FINANCE divides digital assets into two categories: Tokens/coins and other digital assets (e.g., NFT, smart contracts, stoke tokens) and evaluates their credit scores. The credit score of a Token is assessed based on 4 parameters, i.e., (i) the token price, (ii) the market cap (MC) of the token, (iii) the token trading volume, and (iv) the number of transactions related to the token. High-credit-score tokens have a great advantage over low-credit-score tokens. Once being used as collaterals, they offer high loan-to-value ratios to borrowers; lenders also get favorable lending interest rates with their high-credit-score tokens. Users can improve their credit scores once they possess those high-valuable digital assets.
TRAVA.FINANCE also performs credit ratings for other digital assets such as NFT. The credit scores for NFTs are estimated based on the number of times that they have been auctioned on TRAVA.FINANCE or other trusted platforms. NFTs’ scores should not depend on their price because their price is typically determined in an unreliable manner, based on the emotion and the preference of customers.
To evaluate credit scores for a wallet address, TRAVA.FINANCE credit scoring model will take into account the following factors:
Total asset. The total asset represents the financial strength of the wallet address; it is the most intuitive and easiest-to-evaluate parameter. It is also the second most important parameter that affects credit scores. The total asset is the sum of balance and total investment minus total liabilities. The credit score of the address is proportional to its total asset. As this parameter is a volatility index, the credit score is calculated based on both the average total asset in a certain period and the total current asset.
Transaction history. Transaction history is the most important parameter; it has a major impact on credit scores. TRAVA.FINANCE collects and aggregates all exchanges, loans, deposits, and other transactions of the wallet address across multiple DApps to calculate various intermediate parameters such as (i) the age of the address, (ii) its transaction amount, (iii) its frequency of transaction, (iv) its number of liquidations and (v) its total value of liquidations.
Loan ratios. Loan ratios (debt ratios) represent the debt position of the account. It is divided into two sub-parameters, i.e., loan-to-balance ratio and loan-to-investment ratio.
Circulating assets. This parameter represents how active users are in the crypto market. The more money they invest in the crypto market, the more creditworthiness they gain from others. This parameter is evaluated based on 2 sub-parameters, (i) investment-to-total-asset ratio and (ii) ROE (Return on equity).
Trustworthiness of possessing assets. The last parameter for credit rating is the trustworthiness of the assets owned by the wallet address. The wallet can improve its credit score by possessing high-value and trustworthy digital assets. At present, TRAVA.FINANCE evaluates two types of digital assets only (i.e, Token and NFT).
Cross-chain Identification
Collateralized NFTs
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