How to Fix Borrowing in DeFi

  1. Your Decentralized Identity

One of the key benefits of blockchains are the transparency of data. Your on-chain activity is recorded, immutable and visible for all to see. So DeFi is perfectly poised to determine who is trust worthy, reliable and responsible with their accounts to deem it safe to lend too. Just like a traditional credit score from looking at your financial history, however potentially more safe, quick, secure and without prejudice.

There are a few companies using this to solve significant problems in DeFi-borrowing and lending. Companies like,, and The latter we are going to look at more closely in this article.

DeFi is over-collateralized

A key issue in the DeFi space is the requirement of most loans to be matched with an equal or greater amount of collateral. This is usually a product of the volatile nature of cryptocurrency and protocols not willing to take on the risks of under collateralizing. However this proves to be a huge barrier to entry for people to take out loans even if they are perfectly suited to take on that responsibility. What if we could look at the potential borrowers on-chain history to get a more accurate view of risk to the lender and remove that need to require such high collateral backing?

This is where companies like Nomis come in.

You can already enter your wallet now to get you score:, way quicker than a TradFi credit check!
Here you will see they are piecing together key on-chain metrics to get a clear look at your on-chain reputation. Using reputation as collateral is really demonstrating the benefits of blockchain transparency and resonates with the ethos of true Decentralized Finance, making loans accessible to anyone, anywhere with a trust worthy history of on-chain activity.

Your Decentralized Identity

Your dID are you fingerprints in web3. Your DAO activities, contracts signed, NFTs held or traded, your wallet age, your transactions per month, your interactions with malicious contracts or spam. These are all key metrics that we participate in generating on a daily basis in all our DeFi activities and all form some kind of decentralized identity that companies like Nomis can tap into in order to confirm your on-chain reputation and deem it trust worthy to lend to without over-collateralizing or even potentially zero collateral.

This really feels like the future for web3 borrowing and lending. As data analytics and AI machine learning increases, the ability to get a clear sense of ones on-chain reputation will also. Companies like Nomis already demonstrate a path to getting a quick fair credit score in an open source protocol to optimize collateral.

Another plus for strengthening crypto adoption world wide and ensuring everyone has access to DeFi and can leverage it to make a decent living.