The wave of new startups inspired by blockchain technology continues to challenge notions that often go unchallenged by society. Now, a new startup, Bloom enters the arena with the goal of challenging one of the basic cornerstones of the modern economy: credit. We’ve seen projects in the past that aim to change the way that people purchase energy for their household. Other projects aim for bigger goals, such as a complete overhaul of the modern advertising industry. Bloom’s ambition to redefine credit systems is admirable. They are up against a juggernaut; in the modern world, most fiscal decisions are dependent on whether someone is a ‘credit risk.’ The startup aims to tackle pressing issues in the credit reporting industry through a decentralized scoring system on the Ethereum blockchain. The hope is to take power away from major credit reporting industries, and include those alienated by the current credit system.
Credit is, by its nature, one of the most centralized systems that influence our daily lives.The Government of Canada, for instance, notes, "Your credit score is a judgment about your financial health, at a specific point in time. It indicates the risk you represent for lenders, compared with other consumers.” In Canada, two major agencies handle most credit reporting. These agencies are Equifax and TransUnion, for-profit companies that handle credit reporting on behalf of millions of people. In Canada alone, these companies are extremely influential. Many still have the memory of last year’s major Equifax scandal, where the private information of over 145.5 million people was exposed as a result of a security breach. Despite being one of the largest data breaches in history, the scandal has not done much to change how credit reporting is handled in Canada and the U.S.Thinking globally, Bloom cities that there are 3 billion people that cannot access basic credit services. They go on to say that less than 9% of citizens in developing economies have taken a loan from a financial institution.Bloom aims to use its decentralized framework to allow for a credit rating system that is able to include those forgotten by the current credit reporting system. Additionally, the company believes that your credit should be global and that you should not have to start anew when moving abroad.
As of January 1st, 2018, Bloom launched the first phase of their platform. The working model allows users to set up their BloomID, vote within the system, and invite new users to try the credit system.While Bloom’s transactions were previously recorded to a testnet, the launch marks Bloom’s official adoption of the Ethereum blockchain. Bloom is a decentralization application (dApp), meaning it’s an application that does not make use of a central system. Instead, it is up to the users of the dApp to self-govern and make decisions through consensus. This consensus takes the form of a voting system. A user’s influence is based on their stake in the platform. In the fintech world, this as known as a Proof-of-Stake model.To facilitate this model, Bloom has its own dedicated utility token called BloomToken. Casting votes has no cost, and the weight of a user’s vote is proportionate to the number of tokens that they hold.
To replace the current credit scoring system, the Bloom team designed their own system, using BloomID.BloomID works by allowing independent entities of various sizes to collaborate in confirming the trustworthiness of users. In order for an entity to begin validating users on the platform, the entity first has to become an ‘accredited attestor.’In order to become accredited, the entity must submit a proposal. Those with a stake in the Bloom ecosystem then vote to determine if the data should be included in the BloomScore of users. Overall, the system reimagines the current credit scoring system in a way that aims to diversify authority. Instead of leaving the sole burden of decision making to financial institutions, it puts it to the crowd.
Despite the project’s promise, Bloom has a difficult road ahead if they want to achieve mainstream adoption.The current credit scoring model is deeply ingrained in the economic system of most countries. As such, overthrowing the system is a momentous task. Additionally, Bloom is entering a field against opponents like Equifax and TransUnion; both have a lot to lose and a lot of money behind them.However, 2018 might be the best opportunity to convince the masses of the need for a new credit reporting framework. With 2017’s major Equifax breach fresh in the minds of millions of people, and the current decentralization movement currently fueling the fintech world, Bloom may have an opportunity to make a major impact.Image credit: Bloom
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