The convergence of Cefi and Defi

5 min readSep 17, 2021

Revolts, Revolutions, and Rebellions have been noted to occur as early as in the BC’s and have continued as recently as today. Today we look at the innovation that is storming the world and we call it Blockchain Technology. From a geographical standpoint the Chinese, French, American, Russian, and Texas revolutions have been of utmost importance over time. However, from an economic standpoint, the Agricultural and Industrial revolution have tremendously excelled our society forward. Then, came along, the Technology/Blockchain Revolution

This new revolution is converging Centralized finance, better known as traditional financing, to Decentralized financing which involves more technology. DeFi, is the game-changer of the financial sector and the major driver of this revolution. With the evolution of technology over the past twenty-five years, blockchain is no longer taking a back seat. No longer is there a need to walk into a financial institution when Defi transactions can be completed on a smartphone. Bank on the go without the unrealistic fees, policies, and procedures that are required by most financial institutions throughout the world.

As we move forward with Defi the question can be asked if the convergence of Cefi and DeFi future will consist of being a hybrid? Two things, the government’s constant need for regulation and control threatens the development of the cryptocurrency world. However, with the acceptance, the government would potentially be a significant contributor to the growth of the revolution. Currently, we are seeing many countries either accepting cryptocurrency as a means of payment or allowing it to be an option. The City of Miami, in Florida, is accepting bitcoin to pay city taxes and fines for example. Also giving their employees the option of salaries being paid in crypto. El Salvador has made bitcoin the legal tender in the country. Major credit cards such as Visa and Mastercard have also implemented plans to accept the cryptocurrency community.

Regulation is the largest hurdle that the blockchain community is facing. The world’s leading economies might see crypto adoption as a threat to their own currencies, but for every other government, crypto represents a path to economic parity and renewed innovation in their countries. Similarly, wide adoption on the customer level could force establishments like payment processors, lenders, and FICO bureaus to integrate out of pressure from consumers. In the foreseeable future hybrids will exist, especially within the older generations. A percent of the population is conservative and has a substantial amount of the traditional system. Their philosophy is why change something that they have benefited from greatly. Adoption will and is currently taking place. Innovation may be slowed in one geographical area; however, this gives others the opportunity.

Secondly, Over-collateralized loans in the Defi industry have and continue to be a major problem. Let it be noted that the average collateralization ratio is 300%+ for borrowing/lending across all platforms. The swift growth of the Defi lending market is astronomical. The Total Value Locked in the DeFi lending market grew 88x year over year, from $1 Billion to $88 billion as recently as May 2021. Volatility and anonymity symbolize the lack of trust that imposes the need for over-collateralization in the Defi market. LedgerScore is how this trust issue is solved. All three LedgerScore products are focused on systematically increasing the trust between lender and borrower, therefore, reducing the requirement for over-collateralization. Lower collateralization will result in more lending and propelling economies to a healthier position.

For the DeFi lending community to work it is important that borrowers can build credit through crypto loans. LedgerScore is this new concept that is being presented to the Defi borrowing community. LedgerScore credit rating was designed to evaluate and track several indicators of each borrower with the ability to score repayment capabilities. Loan payment history, receivables & payables, and assets are a few of the metrics used to calculate the credibility of borrowers. Greater credibility in return builds trust.

LedgerScore has identified over-collateralization as the most significant hindrance to DeFi Lending growth, with a second being the development of products that proactively reduce the risk to lenders. All three LedgerScore products are focused on systematically increasing the trust between lender and borrower, therefore, reducing the requirement for over-collateralization. We all know that today most societies run on credit. Mortgage for a house, school loans, and business lines of credit will require a lender. LedgerScore will greatly improve the capability of solidifying these types of loans.

Currently, with the lack of a credit rating structure in the DeFi world, the problem arises of credibility and trust. But we must not forget that the blockchain is immutable and because of this, a borrower’s DeFi history is more accurate than the traditional credit scores. All three LedgerScore products are focused on systematically increasing the trust between lender and borrower, therefore, reducing the requirement for over-collateralization, and eventually facilitating zero collateral loans.

The answer is, LedgerScore.



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