The Decentralized Finance (DeFi) industry today consists mainly of the decentralized exchange of digital assets as well as the over-collateralization of digital assets to provide lending services. However, compared to mainstream financial services, it is evident that due to the lack of credit mechanisms, there are still limitations in the allocation of resources to users, and that mainstream financial service mechanisms are difficult to implement. Credit-based DeFi proposes the concept of integrating credit elements into decentralized finance. These elements can be used for credit-based lending or new asset digitization, further expanding the service model and scope of decentralized finance. It also gives DeFi greater potential to provide mainstream financial services.

Based on this concept, CipherProxy will build a decentralized autonomous organization (DAO) initiative called the CipherDAO for decentralized financial services that integrates credit elements. CipherDAO can support the construction of decentralized financial products that combine collateral value and credit evaluation, as well as further decentralized social governance and autonomy. Cipher Protocol will have cross-chain integration with other mainstream blockchain networks and will use the digital assets from these networks, as well as from its own network to build collateral pools. Additionally, Cipher Protocol’s decentralized identity data protocol supports the authentication of various kinds of assets, ranging from simple to complex, to NFT digital assets to lay a solid foundation for the addition of new types of collateral.

Credit-Based DeFi refers to DeFi products that integrate credit elements into decentralized financial services and enhance DeFi products in the following


• Credit lending: Introduces credit assessment into lending products, gradually reducing or even cancelling collateralization requirements, and realizing the application of real resource allocation.

• Asset digitization: The digitization of certain types of assets requires on-chain confirmation of a series of credit elements related to those assets,

such as ownership/asset attributes/legitimacy, etc.

• Regulatory compliance: If DeFi expands the service scope and category of the service group, compliance will become an important requirement, which will involve considering the needs of relevant assets or the credit element review of relevant users.