Credit has been one of the most significant financial instruments in human history. Whether it's people taking out loans for education, or for starting business, or for buying a home, credit significantly impacts human life. It makes people more knowledgeable, lets them turn their ideas into reality ,and allows them to have a roof over their head. **Of course, credit in excess can lead to devastation, but almost anything in excess can lead to devastation.When used intelligently, credit can be used to make society more financially stable, and the people financially independent.**
And yet, access to credit, and credit scoring, is a very unequal playing field. Almost everyone who's reading this probably has the option to go to a bank and take out a loan, whether thats for starting a business, or buying a home. But globally, 3 billion people don't have access to formal credit.And of course, it pushes these people to rely on informal credit.Even here in India, the vast majority of the population has never taken a formal loan. In times of need, most of them rely on informal money lenders, who charge ridiculous interest rates.
**May be you hate the financial system, maybe you think they are theives. But you gotta feel lucky about the fact that you *at least have the option* to access formal credit. That you don't rely on the gangsters and the loan sharks.**
"Muh loans are so bad!!!!"
**Oh Really? How about loans with a ridiculous interest rate, and your physical health as collateral?**
Then, there is the issue of countries like China modifying people's credit scores based on their political opinions.
But there are people out there looking for solutions to these problems. Looking to bring Credit to the 21st Century. The solution, is called **Bloom**.
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Bloom is a decentralized, blockchain-based protocol for calculating credit scores and risk assessment on a global scale. Bloom is a protocol that consists of the following parts:
- **BloomID**: This is a unique, global identity.This means you don't have to rebuild your credit score if you move to a different country.Additionally, BloomID will also enable people/organisation to vouch for someone else's creditworthiness(this is called "peer-to-peer/organisational staking").
- **BloomIQ**: This is a person's credit history, from which your credit score will be calculated. The important part about this, is that you will be able to decide whether your financial information can be disclosed to a person/organisation.
- **BloomScore**: This is your credit score. This is an indicator of how likely you are to pay your debt on time. Because of the concept of peer-to-peer staking, people with no credit histories will still be able to have a reasonable credit score, Because the score of your stakers is also considered while calculating your score.
- **Bloom Token(BLT)**: This is an ETH token that will be used for transactions on the Bloom network. For example, let's say that a lender wants a risk assessment done before lending you money.So you go to a risk assessment company, and pay it in BLT to perform your risk assessment. Also, BLT holders will have control over how the network is governed, and control the protocol itself and any changes to it.
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### My thoughts on Bloom
So interestingly, I came to know about Bloom by clicking an ad about it on Reddit. Maybe I'm an idiot for clicking ads, but it seemed very interesting, and after looking at the whitepaper, it seems even more interesting! It seems like the main problem they are trying to solve, is the fact, that in spite of credit having such a large role in enabling social mobility and financial stability, the industry itself is very opaque, and because of the regulations, is among the least competitive ones. If you want to find monopolies, look at the financial industry.
But anyway, these are the main big changes that Bloom can bring about:
#### 1. It will bring more competition to the credit industry
Because of the global network, and the fact that you have a global identity, a borrower can basically borrow money from basically anywhere in the world. Of course, maybe a lender living on a different continent won't be as willing to give you money, but the fact that you have a chance represents a big improvement over the current industry, which is filled with companies that are the only choice in particular geographical locations.
The same thing will happen with credit scoring agencies. They will also have competition.
#### 2. It will make it easier for new borrowers to enter the formal financial system
The BloomID system has a thing called "staking" that lets another person, or organisation, to vouch for your creditworthiness. **This solves the catch-22 problem of "score not high enough so can't borrow, can't borrow so score not high enough"** In Bloom, while calculating your score, the scores of your stakers will also be taken into account.So you can start out with a low, but usable score.
This will be especially helpful in developing countries, for bringing the poor into the mainstream financial system. It also helps minorities, who may not have had as good access to credit as others.
#### 3. Users will have complete control over their financial data
In the current system, your financial details are tracked, and your score is updated based on this data, that is available to these companies without your consent. **With Bloom, no entity will have access to your data without your consent**. So if your lender is requesting access to your records for a loan, you can give just them(and not everyone else) access to those details.
Or, you can not give them access to the data. Of course, you don't get the loan. *But you have the power to do that*.
Also, maybe if you committed some mistake, instead of your credit score immediately changing by taking the mistake into consideration, you could catch and fix your mistake before the credit score gets updated?
In conclusion,I think Bloom can bring serious improvement to a field that hasn't changed for a long time. It will improve borrowing options for everyone, it will ensure that each identity is unique, and it will help lenders better know their borrowers before loaning them money.
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**Thanks for reading this post.I would love to read your opinions on Bloom in the comments. If you liked this post and want more, follow me :-)**
[harshallele](https://steemit.com/@harshallele)
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#### Sources
- [https://hellobloom.io/](https://hellobloom.io/)
- [https://hellobloom.io/whitepaper.pdf](https://hellobloom.io/whitepaper.pdf)
- [https://blog.hellobloom.io/introducing-bloom-the-future-of-credit-3b0d6ee04f24](https://blog.hellobloom.io/introducing-bloom-the-future-of-credit-3b0d6ee04f24)
- All images from Pixabay.