Karma

Realize that everything connects to everything else.

Problem Statement

Decentralized lending is still largely user-blind. There is no way for users to build a reputation that would grant them access to better borrowing terms (i.e. friendlier interest rates and collateral requirements). Think of any retail user trying to finance a real estate property they've been eyeing. They would never be able to rely on DeFi as source of finance if they have to provide collateral worth more than the property itself. The DeFi ecosystem is being slowed down by user-blind credit terms made necessary by the absence of credit rating — we are working to eliminate this friction.

How We Solve This Problem

Our solution has three milestones:

1. The Karma Protocol:

An API for bootstrapping reputation systems.

Karma enables dApps to keep a ledger of user integrity. The dApp is free to decide based on what behavior karma should be generated or destroyed for its users. By keeping a ledger of user reputation with the Karma protocol, dApps can leverage it to access global reputation scores of unknown users. With this information the dApp can effectively integrate new users within the existing reputation network. It is up to the dApp to decide how to handle its own karma generation, as well as how it integrates users into their system based the global karma score queried with the Karma protocol API. Our mission is to reduce the interactive friction that plagues user-blind systems. The protocol is accessible to anyone in the ecosystem looking to build and prove a good reputation.

An example — Karma as a creditworthiness tracking protocol:

A decentralized lending platform (DLP) seeks to reward users for repeatedly adhering to credit terms by granting them karma and storing it with the Karma protocol. When borrowers fail to meet the agreed upon lending terms, the platform destroys an appropriate amount of their karma. Inboth generating and destroying karma the DLP mints retrieval tokens.

At any given time the Karma ledger can then be used to determine the credit terms that should be extended to a given user based on their reputation. By knowing a user's karma the DLP can offer user-specific interest rates and collateral requirements. The protocol reduces friction in the lending ecosystem by promoting trust.

Finally, when a new user joins the DLP, the platform can use its retrieval tokens to request a global karma score from the Karma protocol for the new user. Based on this score, the DLP can determine how to place the new user within its reputation system and determine the appropriate credit terms.

Why build karma first?

The interactive friction of user-blind application goes beyond financial dApps and can be found in most user-blind mechanisms. It needs to be largely eliminated if we want to make the web 3.0 stack become appealing to retail users.

2. Principal Lending Infrastructure:

Our lending markets will implement the Karma protocol in order to enable users to lend and borrow tokens in the Celo ecosystem. Users may borrow any digital asset by offering Principal tokens as collateral. Interest rates and collateral requirements are a function of supply, demand and a user's karma. Our mission is to provide users around the world with a fair mobile first lending. Celo's mobile-first approach enables us to work towards providing smooth & fair credit globally.

3. Mobile First Access:

Allow any smartphone to smoothly leverage Principal to exchange value and access the decentralized lending markets.

What We Will Build During Camp

We are building the Karma protocol for measuring the credit worthiness of an address that engages in the borrowing of digital assets. We hope to finalize our design of the protocol, define it on-chain and implement it in an initial mobile-first lending infrastructure:

Implementing Karma on Celo

Our plan is to develop the Karma protocol on-chain. We will then implement initial sandbox lending pool markets in which users use Principal tokens as collateral for borrowing a digital asset of their choice. We will launch with cUSD, cEUR and other high liquidity tokens. Users can then start building their karma by easily accessing the infrastructure from any smartphone.

We are looking for active feedback for our development and hope to continuously refine our implementation.

Project Stage and Current Traction

We have recently completed a proof of concept of the Karma protocol on Celo. That being said, we still have a long road ahead and would love to evaluate design choices with mentors during the camp. We want to make sure we build things right and execute for the long-term.