zkRedit: zkTLS-Powered P2P Undercollateralized Lending

The Problem

Traditional DeFi lending requires 150-200% overcollateralization, locking billions in capital inefficiency and excluding users who lack substantial crypto assets. Meanwhile, centralized fintech lenders demand invasive KYC processes that expose sensitive personal data to security breaches and privacy violations.

Key Pain Points:

• Capital inefficiency: Users must lock $150-200 to borrow $100

• Market exclusion: 95% of potential borrowers lack sufficient collateral

• Privacy risks: Traditional credit checks expose complete financial histories

• Trust barrier: No verifiable reputation system in decentralized finance

Our Solution

zkredit combines zero-knowledge TLS (zkTLS) proofs with AI-driven credit assessment to enable undercollateralized P2P lending while preserving user privacy.

How It Works:

1. Privacy-Preserving Verification: Users generate zkTLS proofs from their bank accounts, payment apps, or credit bureaus without exposing raw data

2. AI Credit Scoring: Machine learning models analyze verified financial patterns to calculate creditworthiness and default risk

3. Smart Contract Execution: Credit scores determine loan terms (APR, amount, duration) enforced on-chain

4. Decentralized Risk Pools: Lenders diversify across multiple borrowers based on AI-assigned risk tiers

Technical Implementation

Core Architecture

zkTLS Layer

• Integrates TLSNotary or Plonky2 for generating zero-knowledge proofs of financial data

• Proves transaction history, income streams, or credit scores without revealing actual numbers

• Verifiable on-chain through ZK proof verification contracts

AI Risk Engine

• Gradient-boosted decision trees (XGBoost) trained on anonymized financial patterns

• Features: transaction velocity, income stability, debt-to-income ratio, payment history

• Outputs: Credit score (300-850), default probability, recommended loan parameters

• Continuously learns from platform repayment data

Smart Contracts (Solidity/Rust)

• Loan origination with dynamic interest rates based on credit tier

• Automated repayment schedules with grace periods

• Liquidation mechanisms for partial collateral (20-50% LTV)

• Reputation NFTs that improve with successful repayments

Tech Stack

• Frontend: React + ethers.js/wagmi

• zkTLS: TLSNotary protocol

• AI/ML: Python (scikit-learn, XGBoost), deployed via IPFS + Chainlink Functions

• Blockchain: EVM-compatible chains (Polygon, Arbitrum, Base)

• Oracle: Chainlink for off-chain computation and price feeds

MVP Features

• Connect wallet + generate zkTLS proof from 2-3 data sources

• AI credit score calculation (viewable by user, hash stored on-chain)

• Request loans up to 5x verified income with 30-90 day terms

• Lender dashboard showing risk-adjusted APY opportunities

• Basic reputation system (on-time payment streak)

Market Opportunity

Target Users:

• Crypto-native users with cash flow needs but insufficient collateral

• DeFi yield seekers wanting higher APY than stablecoin pools (12-25% vs 5-8%)

• Underbanked populations in emerging markets with mobile money history

Market Size:

• DeFi lending TVL: $20B+ (99% overcollateralized)

• Global P2P lending: $500B+ market

• Addressable market: $50B+ in undercollateralized DeFi lending demand

Future Scope

Phase 2: Enhanced Credit Infrastructure

• Multi-chain deployment (Ethereum, Solana, Cosmos)

• Integration with decentralized identity (DID) standards

• Social graph analysis (on-chain transaction relationships)

• Credit delegation allowing high-score users to vouch for others

Phase 3: Institutional Features

• Securitization of loan portfolios into tradeable tranches

• Insurance pools for lender protection (2-5% premium)

• Cross-border lending with stablecoin rails

• Integration with real-world asset (RWA) protocols

Phase 4: Ecosystem Expansion

• Credit score portability across DeFi protocols (Aave, Compound integration)

• Business loans with revenue-based zkTLS verification

• Mobile app with biometric zkProof generation

• DAO governance for risk parameter tuning

Long-term Vision

Build the credit layer for Web3—where your on-chain reputation becomes as valuable as traditional credit scores, but remains entirely under your control. Enable a future where 5 billion people can access capital based on verifiable financial behavior, not arbitrary gatekeepers.