Credit didn’t use to be available to the middle class in America. It was for businesses and/or the wealthy. Consumerism didn’t start until the 1920’s, when technological advances made better time-saving devices that was priced just out of reach of individuals.
Smelling a need, financial institutions expanded credit to be available to the average middle class American. For the first time, instead of waiting months/years to save up for a new car / fridge / radio, they could owe it immediately and pay for it over time.
When there’s borrowing, there’s KYC for lending, and credit scoring. After all, banks wanted to be sure the borrower could pay back the loan.
In fact, without the appearance of home appliances, there likely wouldn’t have been lines of credit or credit cards as we know it.
Currently, Defi (decentralized finance) is a growing niche within cryptocurrencies where users borrow and lend money through smart contracts. It’s gotten a bunch of traction and attention. There are currently $466 million of ETH locked up in MakerDao. Check out the rates of other Defi on Loanscan.
Currently, all borrowing is over-collateralized, meaning you can’t borrow more than you’ve deposited. That’s because without credit scoring or KYC, lenders wouldn’t be assured borrowers would pay back the money.
There are people working on KYC and identity in the space. And we know much of the activity right now is trading on speculation. But a second order question is probably more important than how to solve identity on any blockchain:
“What’s the equivalent of the home appliances for cryptocurrencies? What do people want/need to buy that they need to borrow cryptocurrencies for?”
The situation that lead to rampant consumerism in the 1920’s was unique to its time. What is the situation now that’s unique to this time that people will want to borrow money for?
Without a clear answer to this question, it doesn’t yet make sense to solve identity for under-collateralized borrowing and lending. And if you make a Defi lending product, a clear answer will help light your way.