Will there be a token distribution?

We will be generating tokens (BLT) on November 30, 2017 beginning at approximately 9am PT. You can read the announcement on our blog. Make sure to join our Slack and our email list for developments.

How will BLT be used?

BLT has the following functions:

  1. Scoring Proposals:BLT is ultimately the governance mechanism for the BloomScore. Token-based voting allows us to root out bad actors and keep the system stable and provide influence to those who are contributing most to the network. This is also the primary mechanism of defining future changes to the BloomScore.
  2. Security:BLT Tokens implement network fees for invitations. This mitigates attacks by imposing small costs on each transaction, which makes attacks not economically viable.
  3. Payment:BLT serves as a network currency for verifying identity and assessing creditworthiness with independent vendors.
Is a token necessary for Bloom's functionality?

If we didn't have the BLT Token, then it would not be feasible to accredit data providers and identity attesters on a global scale. You need to have an element of decentralized governance in order to actually execute on the long term plan of the Bloom protocol. If there were no BLT Tokens, then it would just a single legal entity or person dictating how the scoring mechanism works. With the token mechanism, other key players will be able to introduce new proposals and vote on them to help drive the future of the Bloom protocol.

How will this help people without a credit score get better access to credit?

The Bloom protocol is intended to help lenders pull up people who are good credit risks who the current system deems to be bad credit risks. This allows people who need credit to receive it and for lenders to potentially increase their target markets.

The Bloom protocol is intended to address this in 2 primary ways:

  1. By creating a network of peer-to-peer attestation in which members of a community can vouch for others they deem to be responsible with their finances. This doesn't mean that Alice is saying "Bob is good for a $10,000 loan". This is Alice saying "I trust Bob to be responsible with the amount of credit he takes relative to his ability to repay". I don't know exactly how much money my friends have, but I have a good sense of who is lower risk. You can find independent 3rd party research surrounding the efficacy of this kind of attestation in the Bloom White Paper. The idea behind this is that as a lender experiments with issuing a loan to one member within a credit vouching network on the Bloom protocol, if that loan is successfully repaid, if gives participants some notion of the viability and risk profile of the surrounding community. The ultimate goal is that a responsible friend group who selectively vouch for each other can pull themselves out of a traditionally "high risk" community.
  2. By pulling in alternative data. The Bloom protocol is intended to make an open market to help introduce MORE ways to determine creditworthiness. Utility bills, phone payments, consistent service payments, etc. We don't think only using historical debt as an indicator is inclusive.

Right now if a lender wants to evaluate a new market, they need to establish creditworthiness with each individual. Our hope is that with these vouching networks the Bloom protocol can help provide more information about a wider network of people with reduced cost of customer evaluation for lenders. We're not proposing that someone with no credit history can suddenly get a mortgage at a good rate. We're proposing that there will be more inclusive ways for individuals to bootstrap their scores so they're not shut out of the system entirely.

What is the state of development?

We started Cognito (formerly BlockScore) in 2013 to serve identity needs for blockchain companies:

I want to help Bitcoin companies overcome one of the most common regulatory hurdles

As a result, we've learned the real-world implications of identity and how to verify identity at scale. We originally started developing tech for transaction analysis on the blockchain 4 years ago while we were researchers at the Stanford Bitcoin Group (hence the name "BlockScore"), but at the time the ecosystem wasn't ready yet.

What is a "federated identity"?

A federated identity is the means of linking a person's electronic identity and attributes, stored across multiple distinct identity management systems.

How will the Bloom protocol manage identity?

All BloomID’s are federated:The creation of a BloomID must be tied to a real world identity.

Trusted attesters verify identities:The Bloom protocol relies on established nodes to "attest" to a user's identity information. These verification providers are not anonymous and are the same verification providers that financial institutions and governments currently use.

Fake identity creation is mitigated:While a user could apply for a BloomID with fake information, it would not receive attestations. Just as a transaction without confirmations may not be valid, an ID without attestations may not be legitimate. It also isn't a guarantee that a transaction is valid if just one or two confirmations are present. Similarly, one attesting node does not necessarily guarantee a valid ID. However, for every attestation that an identity receives, the probability of that Identity being fake drops.

The Bloom protocol connects to the "real world":One could imagine a world where a real person takes out a loan and defaults. While this is simply a risk of lending, the Bloom protocol hopes to mitigate this. Lenders tie their loans into the traditional reporting systems, such as FICO.

The Bloom protocol is intended to bring in personal relationships:In order to further establish creditworthiness and identity, users must stake their peers. Much like co-signing, this makes real world relationships partially impacted by non-payment. So a borrower intending to default wouldn't just be hurting the effectiveness of the Bloom protocol, they would be hurting their real world relationships and real world credit score as well.

The costs to attack the Bloom protocol exceed the financial gain from a loan:Each identity attestation requires payment of BLT. This means that brute forcing PII until an attestation is received would require exponential cost and would be easily detectable.

A brute forced identity will not have credit or payment data:In the event a fraudster successfully generates a fake ID on the Bloom protocol, they would not be able to import any payment history. Payment history is pulled in from different attesters (cell phone companies, utility bill companies). This means that even in the worst case outcome of a fraudulent BloomID, the financial impact on the Bloom protocol would be minimal as this user would not qualify for any loan of financial substance.

How does the Bloom protocol intend to standardize the credit scoring across different countries?

The Bloom protocol start with communities within the US who are underrepresented in the credit system to hone the initial score. Internationally we are looking at inferring different lending properties for a given person by looking at the larger overall network they seem to be a part of.

For example, as you crawl through the connected nodes on a user's graph of peer-to-peer credit vouches on Bloom, if a user has 25 edges/stakes, you end up visiting ~300,000 nodes by extending 3 or 4 nodes out. Each of these nodes will have their own reliability score, a certain peer score, a certain number of loans, different repayment characteristics, and even unique sizes of loans. At a global level, this influences what a risk evaluator can assume from your history and that risk makeup will change based on the country in which you're currently located.

This would form the basis of a more in-depth analysis that will be conducted on a market-by-market basis to help shape the score on a global level.

How does Bloom's scoring protocol voting work?

Lenders, data attestation providers, and borrowers all need to hold BLT, and their amount held will correlate to their influence on the network. As a result, there is an even distribution of BLT relative to a given participant's influence in the ecosystem. Assigning the ability to propose and vote on scoring-level improvements and accrediting actors within the Bloom protocol to these BLT Tokens creates a fair and democratized setup. Governance of the scoring protocol will be gradually turned over to BLT holders, granting them determination over:

  1. Which organizations will be able to update and provide information to a BloomScore
  2. The weights and factors considered in the BloomScore
  3. Development and scoring protocol updates