Wednesday, January 20, 2021

Elastos Oracle and Credit Technology

Elastos Credit Oracle Technology Bridges Blockchain and Traditional Finance

Source: https://mp.weixin.qq.com/s/VekFVVuIkFRiOgX11roWNw 
Translated by Joel M.

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With the popularity of e-commerce and mobile payments, personal information accumulated by Internet Service Providers has made internet credit evaluation services possible and mature. One of the prominent examples of this is Ant Credit. In recent years, trending internet financial services have extended the scope of internet credit evaluation, which has been gradually transformed from marginalized applications to a core service. At the same time, credit evaluation services also provide a strong guarantee for internet financial products. In particular, the bad debt rate of Alibaba’s internet financial products based on Ant Credit is much lower than that of traditional bank financial products, which has also improved the industry’s recognition towards internet credit evaluation.

It is more apparent that credit evaluation will be playing an increasingly important role on the national level. A credit evaluation system covering all society is an important infrastructure for China’s high-quality development and modern economic system, which is a major task deployed by the Chinese Government. It can be said that the credit evaluation based on big data has benefited from the current policy direction. On the one hand, data has become one of the five major resources, the others being land, labour, capital, and technology, and the “New Infrastructure” initiative has brought a nurturing environment to the blockchain and big data industries; on the other hand, the People’s Bank of China is accelerating the application of blockchain into the field of credit evaluation.

Although the credit information service has brought huge changes to our financial services, the current problems with data for credit information services also lead to problems that hinder the wider application and development of credit information services.

First of all, current big data is basically monopolized by giant technology companies. High-quality data circulation and transactions in the credit evaluation industry cannot be realized, resulting in asymmetric information between credit evaluation agencies and users. The problem of siloed “information islands” between credit evaluation agencies is serious.

Secondly, the current competition between data sources is inefficient. Traditional credit evaluation agencies have very limited data channels, which makes the cost of data collection high. This in turn shrinks funding for product development.

Thirdly, the privacy issue of credit information is acute. It is not uncommon to see data leaks due to excessive collection of user data by institutions and applications.

At the same time, the technical architecture of the traditional credit evaluation system pays little attention to users, and does not guarantee user data sovereignty. It is difficult to meet the new requirements of data privacy protection.

In summary, the current market urgently needs a better credit evaluation system. Such a credit evaluation system should firstly clarify the ownership of personal data, eliminate monopolies, and promote the free transaction and circulation of data. Secondly, it has to protect user privacy. Data has to be encrypted on-chain with private keys to ensure privacy and protect the data owner. Finally, to allow supervision, any violation of data privacy should be monitored and traced.

Based on this background and ideal, Elastos is currently establishing a credit evaluation service that bridges decentralized finance and the traditional world, that is, a Credit Oracle. Rong Chen, the founder of Elastos, has always adhered to the concept of “you own your own data”, which resonates with the original intention of Credit Oracle on Elastos.

In August 2019, at the Data Privatization Movement and the LEO on Elastos Conference  initiated by Shenzhen Tencent Cloud, the “data privatization movement” manifesto drafted by Elastos co-founder Feng Han was announced.

The manifesto emphasizes that all the results produced will be open source. It is going to realize the concept of “turning data into everyone’s wealth”. It will promote the use of the new internet with trusted computing technology to influential global organizations so as to protect users’ data rights.

On October 31, 2020, after more than a year of research, a consensus on the strategic direction was reached at the ecological development strategy meeting of Elastos’ core team. Smartweb’s new internet business model moves forward in an important direction: a decentralized Credit Oracle based on Smartweb DID and personal digital assets. Elastos’ credit evaluation oracle will connect traditional finance and DeFi, and serve various third-party DeFi applications, providing a reliable credit reference for the development of DeFi applications.

The decentralized ledger and smart contract based on blockchain has solved the trust issue in P2P interactions, without any centralized organization. This is a major innovation in the trust system of human society. However, the current smart contract cannot actively obtain off-chain information from the outside, and it can only perform tasks in a closed and isolated environment and cannot communicate with the outside world.

The function of an oracle is to write off-chain data and information onto the blockchain smart contract as a mechanism to realize the data intercommunication between the blockchain and the real world. It allows a verified smart contract to interact with the uncertain external world. It is the only way for a smart contract to interact with the outside world, and it is also an interface for data interaction between the blockchain and the real world.

Elastos is a smart web platform based on the blockchain, and the interconnection between on-chain and off-chain is also one of the basic problems that needs to be solved by the platform. Therefore, Elastos incorporates an oracle as a component into its unified architecture.

 

Technical architecture of Elastos’ credit evaluation oracle:

From the perspective of application, the Credit Oracle is a unified service: it collects and summarizes information that are not on-chain, digital assets and other information, and evaluates them in accordance with the rules required by the application or established rules, and provides it to the DeFi application as the user’s credit reference. However, from the perspective of the structure of the credit evaluation oracle itself, the development and project implementation of Elastos credit evaluation services are divided into two important parts:

  1. Oracle

The oracle service is a basic service that connects off-chain and on-chain, and realizes the interconnection of on-chain contracts to the world outside the chain. Oracle will be the core infrastructure of the Elastos blockchain in the future.

  1. Credit Service

In response to the needs of the application, a credit evaluation contract on the chain is provided for the DeFi application to call under the authorization of the user. According to the request of the application, oracle’s credit evaluation adapter is requested to obtain the user’s digital asset status and designated off-chain user data. It needs to perform necessary data processing, and then return the result to the credit contract on the chain through oracle for the DeFi application to call.

Related components such as oracle and credit services are all running on Elastos’ existing blockchain infrastructure. 

The Elastos infrastructure components related to credit evaluation services include:

– Oracle

Realize the acquisition of information outside the chain.

– Ethereum smart contract sidechain

Execute the credit service contract and provide it to the application contract upon calling.

– DID

Used for identification of user assets and other application data related to personal credit evaluation.

In terms of implementation plan, Elastos will develop its own oracle based on ChainLink and name it ElaLink (to be determined). Based on the ELA mainnet DPoS system, ElaLink constructs an oracle trust mechanism based on Elastos’ basic trust consensus. Requests are uniformly distributed through the scheduling contract, and tasks are distributed among the ElaLink Nodes running on the DPoS Super Nodes. Through the SPV module, the information of the DPoS Super Nodes elected in this round on the ELA main chain can be obtained. The correspondence of the identities of the DPoS on the main chain and the sidechain is completed through the DPoS Register Contract. ElaLink will natively support the Elastos ETH sidechain and provide oracle-related basic contracts. ElaLink’s external data source acquisition will be completed by using an adapter. By expanding the adapter, you can conveniently support access to and interact with other mainstream blockchains and internet information.

Regarding the economic model of oracle nodes, oracle itself has a very typical supply and demand model. Combined with the existing DPoS system, while providing more basic services for the Elastos ecosystem, it also allows DPoS nodes to have greater profit margins, forming a win-win situation, and helps to promote the development of the Elastos ecosystem.

 

DID and ID sidechain:

At present, Elastos already has a DID solution based on the ID sidechain, and it has been applied to most Elastos applications and services. In the design of credit evaluation service, DID will be used as the user’s basic identification, combined with eID technology (eID is an identity authentication technology based on domestic cryptography technology, which can lower the citizens’ identity information exposed in the internet while ensuring unique identification. It has been installed in hundreds of millions of mobile phones). The self-declaration of user assets is used as a DID identification and published on the ID sidechain. In this way, the credit reference adapter can obtain the current asset status of the user from other chains related to those assets.

In order to better support the asset declaration in the credit evaluation service and the verification of the asset declaration throughout the process, Elastos will put the declaration  to the existing DID/ID sidechain to provide a more friendly credit evaluation service development platform interface.

Credit Service:

On the Elastos blockchain and oracle, contracts and adapters related to credit evaluation services are developed for application requirements. Credit information service is an application service running on Elastos infrastructure.

The figure below is a schematic diagram of the credit information service and main architecture, as well as the relationship with Elastos infrastructure and dApp. The development of Elastos credit information services will be implemented with reference to this architectural diagram.

Credit evaluation services are mainly composed of three core components:

– Credit Smart Contract

This is a set of smart contracts running on the ETH sidechain, which provides a direct credit service calling interface for dApps. After receiving the call from the application, it will initiate a request transaction to oracle and return the result to the application.

– Credit Adapter

This is an off-chain data adapter running on the oracle node. According to the credit data request initiated by the Credit Smart Contract, the ID sidechain obtains the user’s asset declaration voucher, to obtain the user’s asset status, and returns the result to Credit Smart Contract through the Oracle network.

 

– Assets Declaration

Credit data is ultimately used by the application, so user information comes from the application. In order to activate their own credit evaluation data, users need to declare their personal assets in the application according to the rules of the application, and publish them to the ID sidechain for credit evaluation services. The asset declaration interface can be on top of the existing DID SDK, and the business logic can be encapsulated according to the needs of the application.

Personal credit evaluation is a sophisticated topic. In order to provide credible credit evaluation, multiple dimensions of user data are required. With the improvement of technology, Elastos hopes to use user behavior records on the internet as the basis for evaluation. This will greatly improve the credibility of credit evaluation. In this process, Elastos will always adhere to the concept of “communication orthogonal to computation” proposed by founder Rong Chen,  establish a data-secure credit evaluation computing environment, and provide users with comprehensive data privacy protection. Thus, the Elastos Credit Oracle will build a bridge between the virtual digital asset world and the real off-chain data (internet market or traditional finance). This will make the mainstream data traffic asset, it also allows mainstream users of the traditional internet to use DeFi and their associated traffic and data to generate their wealth. This is along Elastos’ ultimate goal of an “Internet of Wealth”.