Welcome to another episode of 'Tae Talks'. This time, we're diving into the exciting Creditcoin 2.0+ update, exploring the various real-world performance improvements coming with the transition to Nominated-Proof-of-Stake (NPoS).
So join us as we grill Creditcoin founder, Tae Oh, about the upcoming Creditcoin 2.0+ release and its impact on the protocols RWA performance. Let's dive in!
If you've still got questions which you want answering, make sure you hop into our Discord to ask us directly: https://discord.gg/creditcoin
What’s changing with Creditcoin 2.0+?
Tae: After releasing Creditcoin 2.0, the network attracted a lot of miners and now the hash rate of the network is growing really fast. At the moment it is considerably large, in terms of hashrate, we are now larger than many top 100 PoW chains, in fact. And as the network continues to grow in value, we will attract even more miners to the network.
And that alarmed us because, while the hash rate is already considerably large, there are still a lot of PoW miners out there with GPUs or even ASICs that could suddenly start mining Creditcoin and easily dominate the network. So that was a security risk that we had to try and solve.
Of course one solution could have been to liquidate some of our CTC, use those funds to invest in mining hardware, and then create a new mining pool to fight against new these miners. But, relying on that would be a limited and costly solution. So we wanted to move from PoW to PoS to make sure that we mitigate the risk of a 51% attack from a large miner.
As the community already knows, the hash rate of Creditcoin has grown even further since the announcement of 2.0+. That tells you that whoever these miners are, who are investing more of their dollars into this network, they clearly like the direction that we are moving in with the transition from PoW to PoS.
Toby: Okay. So is security the main reason? Are there also other factors which are behind the move to proof of stake?
Tae: Right. So aside from security, PoS will provide a lot of good features for the users of the network. So first, for miners, it's more energy efficient for obvious reasons [over 99.9% more]. You don't have to waste as much electricity to mint new blocks with PoS nodes.
And for users, the block production and TPS are expected to be much faster. So that means we can throughput more transactions for our fintech lenders on top of Creditcoin. Which is another good thing.
Put together, this means the overall network will be much more efficient for real-world asset transactions to happen on top of.
How will Proof of Stake help deliver better real-world asset performance, for both users, fintechs and (former) miners?
Tae: So, for our fintech partners, at the moment they're still forced to run their own PoW node to interact with the Network, whereas a PoS node will be much cheaper and cost-efficient for them. If they start making a serious amount of transactions, it will be much simpler and cheaper for them. That's one thing.
And the second advantage is, because the block time is much quicker and the TPS is much higher, these fintech lenders can pour a lot more transactions into the Network.
For example, if we continue to rely on PoW, then people using our network have to wait a minute or two to finalize a loan transaction. But, if we migrate from PoW to PoS, we are expecting to do everything within less than a minute.
So that actually enables different types of transaction and loan cases, including quicker and smaller loans that can only now happen with 2.0+.
Why is blockchain useful for RWA and credit markets?
Tae: So I think what we need to focus on is why are we using blockchain in the first place. What blockchain allows us to do is build on top of the internet. The internet itself solved the accessibility problem. Today, if you are online, you can get connected to anyone on the internet, you can communicate with each other, right?
But, the internet never really solved the problem of objectivity because there's no objective information available on the Internet. Any information can be forged or faked because making data up is really cheap and easy on the internet.
That issue blocked us from making financial transactions directly with each other. We always had to use some kind of intermediary, be it your bank, PayPal, you name it. By using blockchain we are now able to create a trustless system that has verifiable information in the middle.
So, instead of using an intermediary as we do today, we now have blockchain available with objective information, letting us transact without an intermediary.
This is a good thing for several reasons. The first reason is that anyone can now build and access financial services directly. And the second is that, because there is no intermediary anymore, the costs of transactions are now a lot cheaper. And lastly, because all the information on blockchain is trustless and verifiable, you can create a transparent system that allows us to build new types of financial services that were impossible before.
Before blockchain, we had to assume that any data on the internet, including credit, could be forged, preventing us from building truly online credit data. That is the problem Creditcoin is focused on solving today.
Toby: Tying that all to specific real-world asset industries today, say commodities, credit and supply chains. What value does it provide?
Tae: So, for example, supply chains are already using the transparency and objectivity of blockchain today, letting you follow the movement of goods going from point A to point B directly without having to trust the deliverer (the intermediary in this case).
And for commodity exchanges, you can tokenize commodities and exchange them as a digital asset, which is both cheaper and more accessible due to the reasons I've already mentioned.
That will allow us to, for example, tokenize all the real estate in the world to make a 24/7 real-world market that anyone can access, with that tokenization allowing us to make fractions of a house to further unlock liquidity. Things that were all impossible before.
Toby: Plus it's also much cheaper than to exchange the houses. Those are great examples of real-world asset industries which are open to disruption, but tying those original advantages of blockchain, could you explain how those relate specifically to credit and Creditcoin?
Tae: So we'll just go backward starting from transparency. Because the blockchain has the transparency of data and true objectivity, you are able to assess the objective credit history of users on the network before you make your investment decisions. This added information will allow or help retail investors empower themselves to make a direct decision instead of relying on an intermediary.
And then, because they are making a direct transaction with the fundraiser, there is no middleman fee. So what the borrower is paying back is almost directly what you're getting as an investor, deducting, of course, the CTC fee that you’re paying to use the Network.
Toby: Whereas normally it would be your bank stealing all of that spread by the way guys.
Tae: And the last point, because the nature of the Internet allows anyone to access this network, anyone on the Internet can be a borrower or an investor of Creditcoin. This accessibility allows the borrowers to raise liquidity from people on the other side of the world, and get a better rate compared to, for example, the loan shark in the local market.
How does Creditcoin help solve real-world problems?
Tae: So in the emerging markets, there are a lot of unbanked or underbanked people who don’t have access to the financial system. Not getting a bank account, not getting a credit line etc. And this stops them from building credit history. Because they don't have access to a proper credit history, they can't empower themselves financially to better their financial well-being.
By creating a public ledger that allows them to build credit history, and directly connecting them to investors, we allow them to build this objective credit history, which can then be used in the future to get assessed by lenders and help them access a fair credit line.
This interoperable, objective credit history means that users who have been paying off their loans can be treated better to people who have been missing their payments, or to new people without any credit history. Creditcoin allows this basic principle of credit to apply to anyone on the Internet, regardless of their access to modern banking or credit services.
Toby: Also, by connecting it to crypto, there's this huge source of crypto liquidity now. All of these people online are looking for returns. And by connecting these two parties we can really solve, on the one hand, the information problem, and on the other, also create that liquidity.
Tae: Right. So DeFi and crypto today have a problem with unsustainable yield generation - yield farming, [some forms of] staking - these are examples of products that were not sustainable in the long term. Now we know that. On the other hand, in the TradFi world, there was limited access to liquidity in certain markets. So we are linking the liquidity of Defi with real-world yield generation that is sustainable, crossing out the problem on each side.
Toby: So the vision with Creditcoin is basically to solve the information problem so that people can assess risk properly? That means we can give these people loans and, on the other hand, connect it to crypto so that we can also raise that capital where we need it.
Tae: Right. So instead of raising or borrowing from a local loan shark, people on Creditcoin can now get access to liquidity from anyone in the globe. On the other hand, investors not only get access to real-world asset markets, but they also can choose a region or a sector to invest in based on the types of loans that they're making on the ground.
Fancy a little taste of Creditcoin 2.0+'s incredible power? Good news then friends, the Public Testnet is almost live, letting you earn hundreds in CTC rewards and up to $1,000 per bug reported! By joining the Testnet you can secure your free stake in the future of Creditcoin.
Getting started couldn't be simpler, just head over to our Twitter page and follow the instructions to request your free testnet tokens. We can't wait for you to join us on this thrilling journey!
Creditcoin is a foundational L1 blockchain designed to match and record credit transactions, creating a public ledger of credit history and loan performance and paving the way for a new generation of interoperable cross-chain credit markets.
By working with technology partners, fintech lenders such as Aella, and other financial institutions across global emerging markets, Creditcoin is securing capital financing, building credit history and facilitating trust for millions of underserved financial customers and businesses based on the principles of RWA.