What is RociFi?
Are you tired of traditional lenders giving you the cold shoulder? Well, with RociFi, you can leave your credit score at home and let your on-chain data do the talking! This DeFi protocol is scoring and lending based on your on-chain activity, and it won't judge you.
RociFi is a new DeFi protocol that launched in 2022. Self-described as a Web 3.0 credit scoring system, the protocol assesses a borrower’s likelihood of defaulting on their debts by analyzing DeFi transaction history and behavior, coupled with web3.0 reputation.
RociFi is permissionless in the sense that anyone can join (no KYC required), and the risk assessment for borrowing is calculated by a smart contract and updated in real-time.
Since RociFi is so new, they don't have a DAO yet. Their team calls it progressive decentralization as their product gets launched on the mainnet. They don't have a token either. According to the team, they don't deny nor confirm it.
How does RociFi work?
RocFi is a stablecoin lending protocol that lends users money based on their credit score. In order to borrow on RociFi, users must mint an ERC-721 NFCS token (Non-Fungible Credit Score). The NFCS proves ownership of the address bundle that the borrower wishes to be credit scored.
Unlike TradFi credit scores, RociFi’s is based on risk, meaning the lower the better. RociFi’s credit score scale is 1–10 where 1 is the lowest credit risk (best score) and 10 is the highest credit risk (worst score).
Good credit scores (1–6) provide access to under-collateralized loans while riskier ones (7–10) receive over-collateralized loans at LTVs above market rates.
The protocol assesses a borrower’s likelihood of defaulting on their debts by analyzing DeFi transaction history and behavior, coupled with web3.0 reputation.
A lower credit score means lower default risk which enables lower collateralization ratios and borrowing costs (APR). In general, if a user has responsibly participated in DeFi, i.e. lending/borrowing/ liquidity provisioning/DEXes, and has a solid reputation, they will most likely receive a good score.
However, statistically speaking, the very best credit scores (1–3) are the hardest to receive. For example, RocFi scored 10,000+ Aave borrowers and scores 1–3 comprised only 7% of total unique borrowers.
RociFi serves users who need fixed-rate fixed-duration loans. At the moment, RociFi offers only 30-days loans. The rates of loans are fixed and vary per pool. At the moment, the collateral is set as 84% for the under-collateralized pseudo-anonymous pools and 120% for the over-collateralized pools.
How to make money on RociFi?
Making money on RociFi is just like using any other DeFi lending protocol. The only difference is that your borrowing limit is dictated by your on-chain activity.
In order to stat using the protocol, users must first be credit risk-rated by the Protocol’s credit risk scoring (CS) API. This means minting a Non-fungible Credit Score (NFCS) token that will act as the reputation credentials on the app.
NFCS are used to verify ownership of the addresses for which the credit risk score (CS) has been generated. Because NFTCs are issued on Polygon, gas fees won't be an issue.
Here's how you mint a NFCS:
Open the RociFi app
Click on the Create NFCS button
Add one borrowing address, or more
After you’ve added all addresses to the bundle, click “Continue”
Sign the Address
Click “Mint NFCS”
Done!
After your NFCS has been minted and credit score generated, your credit score information will appear on the screen. The credit score is associated to the addresses you have bundled. Now that you have minted your NFCS, you can borrow on RociFi based on the credit score.
In order to maintain a good credit score, the bundled addresses should accrue as little bad debt as possible. It's just like your bank credit score, only it's updated in real time and the worst thing that can happen is that you can borrow less on RociFi.
RociFi Lending
Lenders on RociFi can earn high and stable APY by depositing capital into one of their three lending pools based upon their risk tolerance. Unlike other DeFi protocols providing under-collateralized loans, RociFi doesn’t require deposit lockup.
Because lenders can withdraw at any time without restrictions, they are also subject to the scoring system, which will affect their APY. Such factors include protocol behavior i.e at what time of repayment cycle lenders deposit and when they withdraw, and external factors such as the price of collateral at the time of liquidation.
Since all these factors are not possible to predict, RociFi communicates about APY in two terms: Projected APY & Effective APY.
Projected APY is the sum of the behaviors exemplified above. It is based on simulations of capital investment outcomes for the lenders into the Middle-risk pool (Scores 4–6, APR 24–36%).
Effective APY is the actual interest earned by lenders as the result of the performance of the pools.
To lend on RociFi follow these steps:
1. Open the RociFi app
2. Input the amount of USDC or USDT you would like to deposit
3. Click "Deposit"
4. Confirm the transaction
5. Profit
Remember, you can withdraw at anytime. However, withdrawing at an inopportune time (the protocol will alert you) can result in a lower APY in the future.
RociFi Borrowing
If you need to take a USDC/USDT loan, the you've come to the right place. Loaning stablecoins can increase your buying power while maintaining exposure to the underlying asset.
As a borrower on RociFi, your capability to take a loan is influenced by your on-chain activity.
Here's how you borrow on RociFi:
Enter the RociFi app
Navigate to the borrowing page through the Markets page.
Select the loan duration
Select the collateral asset you want to provide
Specify the amount of stable coin you want to borrow
Click on Borrow and approve the transaction