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DeFi Credit Score
The DeFi Credit Score is a numeric value (between 0 and 999) that describes the credit risk of an individual address based on their on-chain borrowing activity. The Score is constructed from three main components - the Daily Score Reward, the Survival Score Reward, and the Liquidation Penalty. These three components are combined to derive the final DeFi Credit Score.
  • The Daily Score Reward evaluates borrow usage over the past 120 days relative to an “optimal” borrower archetype and rewards points along the “Rewards Curve” on a daily basis.
  • The Survival Score Reward evaluates a borrower’s ability to avoid liquidations relative to the rest of the market, rewarding points (or subtracting points if liquidated) proportional to the market’s “liquidation density” on a given day.
  • The Liquidation Penalty subtracts a fixed number of points for every day in which a liquidation occurs.
Through managing a risk-adjusted position over a period of time while avoiding liquidations, borrowers can unlock greater capital efficiency in DeFi through borrowing on the ARCx Credit platform.
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