# On-Chain Credit Scoring ⎊ Area ⎊ Resource 2

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## What is the Credit of On-Chain Credit Scoring?

On-chain credit refers to the assessment of a borrower's creditworthiness based on their transaction history and asset holdings recorded on a blockchain. Unlike traditional finance, this credit assessment relies on transparent, verifiable data rather than centralized credit bureaus. The goal is to enable undercollateralized lending in decentralized finance.

## What is the Scoring of On-Chain Credit Scoring?

On-chain credit scoring involves applying quantitative models to analyze a wallet's activity, including borrowing history, repayment patterns, and asset diversification. The scoring mechanism evaluates factors such as protocol participation and collateralization ratios to generate a risk profile. This score determines eligibility for loans and influences interest rates.

## What is the Analysis of On-Chain Credit Scoring?

The analysis of on-chain data provides insights into a user's financial behavior and risk profile. By examining transaction history, protocols can assess a user's reliability and ability to manage debt. This analytical approach aims to create a trustless system for credit assessment, reducing reliance on traditional financial intermediaries.


---

## [Off-Chain Computation On-Chain Verification](https://term.greeks.live/term/off-chain-computation-on-chain-verification/)

## [Credit-Based Systems](https://term.greeks.live/term/credit-based-systems/)

---

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**Original URL:** https://term.greeks.live/area/on-chain-credit-scoring/resource/2/