Building The Trust Network Through Bird Oracles
Creating the mechanisms to advance DeFi to the next stage in its evolutionary progression as the new and emerging, trust-less financial system.
This article was originally written and published for Bird.Money on December 20th, 2020.
The current decentralized lending and borrowing space is lacking the necessary tools that are being leveraged and utilized regularly by the legacy financial system. These are the mechanisms which mitigate risk for financial institutions while rewarding prudent financial behaviour for borrowers utilizing the lending services. Tools such as credit scores or credit ratings allow financial lending institutions to evaluate a borrower’s financial credit history in order to establish the necessary collateral required in order to proceed with the borrowing transaction. This would in turn allow for proper safeguards and risk management against over-leveraging a borrower in order to avoid the risk of a loan default.
Building the Trust Network
The Bird.Money Trust Network is building on the concept of creating safeguards for DeFi lending protocols while also allowing borrowers to maximize the amount of borrowed assets available to them. We do this by providing a Trust Score which delivers a user’s DeFi history associated with their ETH address to the lender.
By separating the network into 2 parts: Data Providers and Data Consumers, our objective is to create a decentralized Trust Network where DeFi users or Oracle Node providers will be incentivized to provide a Trust Score for DeFi customers.
The Trust Rating will constantly be updated with information such as loan defaults, hackings, rug pulls, scam as well as other malicious behaviour associated with a particular ETH address.
This information will be made accessible to information consumers, in this case the DeFi institutions, lending protocols and outside financial institutions looking to delve into the DeFi market, in order for them to be able to make informed decisions and manage risk accordingly. The benefit to the borrower will always be to leverage the most amount of borrowed assets for the minimum amount of required collateral.
In order to ensure that the data being delivered by the data providers to the data consumers is of high quality and accuracy, the data contents will require to be confirmed to match the provenance from multiple nodes in order to ensure against any forms of data deprecation.
A reward system for node providers and tier charges for information consumers alike will be used to incentivize the delivery of quality data while putting a value on that qualified data being provided.
Trust Network Data Providers — Oracle Nodes
Data providers looking to operate a node as part of the Bird.Money Oracle Trust Network will be incentivized to provide quality data to data consumers.
Some examples of the data to be provided will be as follows:
- Trust Ratings
- Blacklisted accounts
- Known Hackers
- Scams, rug pulls and other malicious activity
Trust Network Data Consumers
The Trust Network’s data consumption will primarily be utilized by lending protocols, staking platforms, financial institutions, and others looking to leverage information on their borrowers/users in order to mitigate risk against loan defaults while allowing the borrower/user to maximize the amount being leveraged against.
The data consumer in this case will need $BIRD to access this detailed information as it is the main form of currency in order to obtain the required Trust Score being provided by the Oracle node operators.
Reward and Monetization System
The following is a walkthrough of how the rewards and monetization of the Trust Network will operate.
A data provider in the way of an Oracle node will take their fees in $BIRD, which will have been provided by a data consumer. In this case a lending protocol or other financial platform.
The data consumer will need to buy or have obtained $BIRD in order to use the oracle function and be returned a Trust Score on a particular ETH address.
Oracle node setup will be completely simplified for the user (providers and consumers) requiring only the need to install the Node Package Manager (NPM). Documentation will be made available to assist in the process