Zeru Finance

Coming from a middle class background we knew how important credit is. But to get credit in India there was an eligibility criteria, discrimination based on colour, caste etc, capital inefficiency and centralised exploitations on individuals. People who are unbanked and underbanked were not able to get access to credit because of these restrictions.

When we found out about this problem and started working on it. We wanted to make the process of taking the loans, getting access to credit decentralized and permission-less where anyone around the world will have access to credit without any discrimination and eligibility criteria. Fortunately we found Decentralized Finance(DeFi) space, where it’s decentralized, permission-less, transparent and built using the blockchain technology where anyone around the world who has an internet connection can access it. Bingo!

Although DeFi is decentralized, permission-less, global, transparent, it comes with its own cons such as users are anonymous, so it will be close-to impossible to give credit score, Currently the Credit score in DeFi has no backing since it's given based on previous transactions of the user which can be manipulated easily and there is always risk of defaulting the loan. And in DeFi all the loans are Over-collateralized where users need to deposit $100 worth of crypto to get a crypto loan worth $50. This is hindering the DeFi ecosystem from reaching its true potential and it's difficult to get new users to use it because of this user experience. Credit delegation is also another problem in DeFi because of its dependence on trust. 

We worked around these issues and succeeded in finding the solution.

We have built a decentralized lending and borrowing protocol with credit infrastructure where the users around the world can take Zero/Under collateralized loans without any discrimination and eligibility criteria.

The problem we are trying to solve is particularly difficult in DeFi as the participants are completely anonymous and creating a credit profile is close to impossible and without Over-collateralized loans there is always risk of defaulting.

Credit Infrastructure to DeFi : 

We build a line of credit for users using our proprietary equation which considers the behaviour of the user and the value they bring to the protocol. The behaviour of the user is represented as credit score (which is called zScore) given by the protocol to the user based on the interactions with the protocol. The built line of credit can be used to take zero/under collateralized loans, mitigating the risks involved in lending in DeFi. The line of credit is not the score, it's the real assets backing the loan which are stored in a reserve called credit reserve which is a protocol-controlled-value (PCV) . This way we can bring in credit infrastructure in DeFi for providing zero/under collateralized loans for users around the world, since DeFi is anonymous and global there will be no discrimination and everyone around the world can take loans on Zeru.

Assessing Credit Worthiness by Credit Profiling in DeFi : 

We are not using the traditional way of calculating the credit score based on the previous transactions on the blockchain since the previous on-chain transactions can be done to manipulate the credit score of the users, so we rely on our own way of calculating a credit score based on the behaviour of the user with our Zeru protocol. We use soulbound tokens to give users a credit score (zScore) backed by on-chain user behaviour with Zeru protocol and on-chain assets (line of credit). These soulbound tokens cannot be transferred to anyone; it will be associated to the user forever which will act as a social reputation score, this social reputation score can be used by other protocols too to check the credit-worthiness of the user. When the user has a good zScore then it implies that user behaviour is good and they can build their line of credit faster. The better the credit score the faster it is to build a line of credit. A bad credit score means it's harder to build a line of credit, this prevents users from defaulting on their loan. Since users are anonymous there will be no bias in checking the creditworthiness of the users, it'll be done fairly for everyone.

We facilitate Credit delegation where users can delegate their line of credit that they have built to other users by minting an NFT (Non-Fungible Tokens) which represents their line of credit and transferring it to others, whoever holds the NFT holds the line of credit. This removes the dependence on trust and the users can choose to sell the NFT or send it to anyone.

Our solution aims to serve individuals who are currently excluded from traditional financial systems due to factors such as lack of access to formal ID, discrimination, and financial exclusion who are willing to take risk and build wealth. Our solution provides a decentralized finance (DeFi) space with credit infrastructure that allows users to take out zero or under-collateralized loans based on their credit profile (zScore). By removing the need for collateral based on the user’s credit profile, our platform provides access to credit to individuals who may not have the necessary collateral to secure a loan through traditional means. This can have a significant impact on their lives by allowing them to pursue opportunities that may have been out of reach due to lack of access to traditional financial systems. Additionally, by using blockchain technology to create a decentralized, permission-less platform, We aim to provide a more equitable and transparent financial system that is accessible to anyone around the world with internet access.

Our team is uniquely positioned to deliver this solution as we have a deep personal connection to the problem of limited access to credit, having experienced it ourselves growing up in a middle-class family in India. Additionally, we have developed a strong foundation in the fields of blockchain, DeFi, and Web3 since 2018, which has given us a solid understanding of the technical aspects of building a successful platform. Our experience participating in and winning hackathons has also given us the confidence and expertise necessary to create a better architecture, manage our time efficiently, and work effectively under tight deadlines. Altogether, our team has the expertise, passion, and experience to bring this solution to life and make a meaningful impact on the lives of people who lack access to affordable financial services.

We had concept of the idea then we worked on it and now we have working prototype ready.

We haven’t launched yet, but we already have a prototype ready and strong supportive discord community of 500+ members. 

We see MIT Solve as a platform that can help us gain access to resources, funding, and mentorship to scale our solution and make a greater impact on society. Additionally, we believe that the Solve community of like-minded entrepreneurs, experts, and investors can provide valuable support and guidance as we navigate the challenges of launching and growing our product.

Firstly, we leverage blockchain technology to provide secure and transparent transactions, allowing individuals to safely transfer and borrow money. This not only increases access to financial services for underserved and excluded populations but also helps reduce fraud, corruption, and inefficiencies in the existing financial system.

Secondly, our solution provides a new credit assessment method that is zScore to the users which represents the current credit worthiness of the users which is given not based on the previous transactions in the blockchain but with the current interactions with Zeru protocol to assess the creditworthiness of individuals who have traditionally lacked equitable access to credit. This approach reduces bias and helps expand the pool of eligible borrowers, increasing financial inclusion.

Thirdly, we have a new model called TVL(Total Value Locked) + PCV (Protocol Controlled Value) model using which we have a proper risk mitigation process where the borrowers are given loans based on the line of credit that they have built at Zeru protocol. The line of credit acts as the backing for the loan, In case of the loan default the line of credit can be used to recover the loan.

Fourthly, we utilise NFTs (Non-Fungible Tokens) to represent the line of credit and facilitate Credit delegation. Users can mint a NFT representing their line of credit and choose to sell it or send it to anyone around the world.

Next Year:

• Launch a pilot program, providing access to our zero/under collateralized loan product to individuals in our community.

• Gain a TVL of at least $100,000 worth of crypto on our platform.

• Partner with other protocols that align with our vision and values.

• Creating credit profiles of at least 5000 users.

Next Five Years:

• Gain a TVL of at least $5 Billion worth of crypto on our platform.

• To be in the top 10 lending and borrowing platforms in DeFi.

• Creating credit profiles of at least 100,000 users.

• Conducting research and development to enhance our platform's efficiency, security, and user experience, and incorporate additional features such as savings and investment products.
  

Community is the most important part of our protocol. Yield farming will help us to attract the users and become a part of our community, airdrops and Influencer marketing will help us to create awareness of the project.

We measure our progress toward impact goals based on

• Total number of users using our platform

• Total Value Locked and Protocol Controlled Value in our protocol 

• Total Number of Credit Profiles created 

• Total Revenue generated

We know people need what we are making because any developing country will need credit to grow. Making this process decentralised, permission-less and capital efficient will be much more beneficial. As their is no credit infrastructure in DeFi building a decentralised credit profile owned by users will be much more efficient and discrimination free.

We made a survey on DeFi users and our own discord community of 500+ users. The insights where, there is No Credit Infrastructure in DeFi even if the users are loyal to the protocol there isn't any way to know it. They want to have a credit profile where they can build it and use it to get uncollateralized loans in DeFi. Users are looking for low cost lending and borrowing, high security of the protocol etc.

Zeru utilises Blockchain technology which provides a secure and decentralized ledger that allows for transparent, immutable, and tamper-proof transactions. Zeru’s blockchain architecture incorporates smart contract technology, which allows for the creation of programmable agreements that automatically execute when certain conditions are met. These smart contracts are used to facilitate a wide range of financial transactions, such as loans, credit profiling etc. We utilise smart contracts to automate the lending and borrowing transactions, reducing the need for intermediaries and increasing efficiency. 

We utilise a new model called TVL (Total Value Locked) + PCV (Protocol Controlled Value) model using which we provide zero/under collateral loans and take care of the risk mitigation process in case of default. 

Additionally, we give credit scores using soulbound tokens (SBTs) which cannot be transferred to anyone and it will be bound to the users and it will be done anonymously to reduce barriers to financial inclusion for those who lack formal identification. We create a credit profile for the users as a social reputation so that they will get benefits of the DeFi ecosystem.

We share MIT Solve commitment to diversity, equity, and inclusion and acknowledge the importance of incorporating these principles into our work. As a global product based on blockchain technology, we recognize the need to ensure that our solution is accessible and inclusive to people from all walks of life.

We believe that diversity is a strength and have a goal to build a diverse team that reflects the communities we serve. We strive to partner with organisations who share our values.

To promote equity, we design our policies and practices with the aim of providing equal opportunities to people of all backgrounds. We seek to reduce barriers to access and ensure that our solution benefits everyone, especially those who are often underserved.

Inclusion is a key component of our work. We are committed to creating a welcoming and respectful environment for our team, and we seek to ensure that our solution is designed with the needs of diverse communities in mind. Through our use of blockchain technology, we aim to empower communities by providing greater transparency and control over their financial transactions.

Zeru is a Decentralised lending and Borrowing protocol with Credit infrastructure in DeFi.

1. Reserve Factor

The users who are borrowing need to pay interest, we have a reserve factor which allocates a share of the interest to the ecosystem treasury.

 2. Credit Delegation Fee

When users are using Credit delegation small credit delegation fee will be charged to the users which will go to ecosystem treasury. 

 The revenue generated from these services will be reinvested in the platform to improve its functionalities and expand its reach.

Our plan for becoming financially sustainable is to secure funding from investors during the initial launch phase to support the launch and marketing of our product. As we start gaining more users and generating revenue, we plan to reinvest a portion of our profits back into the company for growth and expansion. Additionally, we plan to explore various revenue streams, such as Credit delegation fee and yield generation using PCV model, to increase our revenue and ensure long-term financial sustainability. Our ultimate goal is to create a self-sustaining business model that can continue to provide value to our users and drive positive impact in the world.

We have been incubated and funded by a joint venture between PES University and a Venture Fund CoCreate. The joint fund is called PESU Venture Labs. The round was for $200K for 20% equity. This was during the idea stage of our product and now we have developed a prototype ready and detailed business plan and financial projections based on market research and analysis. We have identified potential revenue streams such as reserve factor, Credit delegation fee, yield generation using PCV model. Our team is also exploring various funding opportunities such as grants, partnerships, and investment from investors.