ARCx (old): Decentralized Lending Protocol Based on DeFi Credit Scoring

What is ARCx (old)

Friends, imagine in our daily lives, banks decide whether to grant you a loan and the amount based on your credit history. The better your credit, the more conveniences you enjoy. In the blockchain world—what we often call Web3—a similar “credit system” is needed. ARCx (old) is such a project, dedicated to building a Decentralized Reputation Protocol. Simply put, it aims to establish a “credit profile” for your digital identity on the blockchain.

This project analyzes your various on-chain behaviors, such as which decentralized finance (DeFi) activities you participate in, your lending history, whether you repay on time, etc., to generate a DeFi Credit Score for you. This score is like your credit score in traditional finance—the higher it is, the more privileges and advantages you unlock in the DeFi world, such as better lending terms.

The core target users of ARCx (old) are those seeking higher capital efficiency in the DeFi space. Through this protocol, users can obtain dynamically maximized loan-to-value (LTV) loans based on their on-chain behavior, especially when using Ethereum (ETH) as collateral.

As for the term “old,” it refers to a major token update. The original ARCx governance token (Old ARCx Governance Token) underwent a 1:10,000 split via community vote, becoming the new ARCx governance token. So, when we discuss ARCx (old) today, we mainly refer to the project’s stage before the token update and its core reputation protocol concept.

Project Vision and Value Proposition

The vision of ARCx (old) is to become a minimally governed central bank, issuing credit against various DeFi assets through its native stablecoin STABLEx. It aims to provide participants in the Web3 world with a trustless way to build reputation, and to offer other protocols and platforms a mechanism to identify, reward, and further incentivize users with good reputations.

The core problem the project seeks to solve is the low capital efficiency prevalent in the DeFi lending market. In traditional DeFi lending, due to the lack of effective credit assessment mechanisms, users often need to provide excessive collateral to obtain loans, greatly limiting capital utilization. ARCx (old) introduces an on-chain reputation layer—a DeFi credit score—to more accurately assess risk and optimize capital allocation.

Compared to similar projects, ARCx (old) stands out with its DeFi credit scoring mechanism, which is not a “black box” model but is based on transparent and easy-to-understand rules. It incentivizes responsible borrowing behavior, allowing users to gradually improve their credit score by avoiding liquidations and thus unlock higher capital efficiency.

Technical Features

The technical core of ARCx (old) lies in its DeFi Credit Scoring System and Passport.

• DeFi Credit Score: This is a system that assesses credit risk based on the historical on-chain lending activity of individual wallet addresses. It analyzes your lending usage on DeFi platforms, whether you avoided liquidations, etc., and scores you accordingly. The higher the score, the better your credit.
• Passport: Your DeFi credit score is uploaded to a non-transferable NFT (Non-Fungible Token—a unique digital asset on the blockchain)—the Passport. This Passport becomes your digital reputation proof in the Web3 world.

The protocol uses an efficient and secure oracle infrastructure to publish the scoring results of each address on-chain. Then, based on the user’s DeFi credit score, it offers personalized maximum loan-to-value (LTV) loans. Additionally, the ARCx Credit protocol features a three-tier vault structure and dynamic credit limits based on historical lending, to prevent excessive risk exposure and debt concentration.

Tokenomics

The native token of ARCx (old) is the ARCx Governance Token (ARCX).

• Token Symbol: ARCX.
• Issuing Chain: Mainly on the Ethereum network.
• Total Supply or Issuance Mechanism: The original ARCx governance token (Old ARCx Governance Token) underwent a 1:10,000 split via community vote (AIP-2). This means if you held 1 old token, you would receive 10,000 new tokens. After the split, the total supply was set at 100 million ARCx governance tokens.
• Inflation/Burn: The AIP4 proposal passed on September 3, 2021, minted about 60 million ARCX in one go, bringing the total supply to 100 million.
• Token Utility: The core function of the ARCx governance token is as the governance mechanism of the ARCx protocol. Token holders can vote on protocol fund expenditures and participate in on-chain governance to upgrade the protocol. In the future, token holders may also vote to decide on receiving network-generated cash flows.
• Token Distribution and Unlock Information: The distribution plan includes angel investors, the ARCx team, and $KERMAN holders, with different unlock dates and release schedules. The initial unlock date was postponed to smooth the inflation curve.

Team, Governance, and Funding

• Core Members: Kerman Kohli is mentioned as one of the team members.
• Team Features: The project’s whitepaper was released by the ARCx core team in 2022.
• Governance Mechanism: The ARCx protocol adopts a decentralized governance mechanism, with the ARCx governance token (ARCX) at its core. Token holders can participate in protocol decisions by voting, such as approving ARCx Improvement Proposals (AIPs) and deciding on treasury expenditures.
• Funding: The project has received investment from well-known institutions including Dragonfly, Scalar Capital, LedgerPrime, and Electric Capital.

Roadmap

Here are some key milestones and plans for the ARCx (old) project:

• 2020: Project founded.
• September 3, 2021: AIP4 proposal passed, minting about 60 million ARCX in one go, bringing total supply to 100 million.
• 2022: ARC Governance whitepaper released, aiming to establish decentralized governance and solve capital efficiency issues in DeFi lending.
• Q2 2022: Planned launch of credit score-based lending functionality.
• Mid-October 2022: Planned smart contract audit by Trail of Bits.
• Ongoing: Old ARCx token holders can at any time use the migration portal on the official website to burn old tokens and mint new ARCx tokens; the migration contract will remain permanently open.

Common Risk Warnings

Investing in any cryptocurrency project comes with risks, and ARCx (old) is no exception. Here are some common risk warnings:

• Technical and Security Risks: Smart contracts may have vulnerabilities that could be exploited, resulting in asset loss. Although the project plans audits, audits cannot eliminate all risks.
• Economic Risks: The cryptocurrency market is highly volatile, and the price of ARCX tokens may be affected by various market factors. Additionally, the effectiveness of the DeFi credit scoring system and its impact on the lending market are uncertain.
• Compliance and Operational Risks: The regulatory environment for decentralized projects is constantly evolving, and future regulations may impact project operations.
• Market Acceptance Risks: The concept of DeFi credit scoring is relatively new, and its acceptance and adoption across the DeFi ecosystem will affect the project’s long-term success.

Remember, cryptocurrency investment is highly speculative and you may lose your entire investment. The above information does not constitute investment advice.

Verification Checklist

• Block Explorer Contract Addresses:
  • Old ARCx token contract address: 0xED30Dd7E...Ce2614AdB (Ethereum)
  • New ARCx governance token contract address: 0x1321f1f1aa541A56C31682c57b80ECfCCd9bB288 (Ethereum)
• GitHub Activity: ARCx has an official contract repository on GitHub named ARCx/0xArc, where you can check code activity.

Project Summary

In summary, ARCx (old) is an innovative project in the decentralized finance (DeFi) space, aiming to solve low capital efficiency in DeFi lending by building an on-chain reputation protocol. By creating DeFi credit scores and Passports (non-transferable NFTs) for users, ARCx hopes to offer better lending terms and more financial opportunities to users who behave responsibly on-chain. Its ARCX token serves as a governance tool, empowering community members to participate in the protocol’s future development and decision-making.

However, like all emerging blockchain projects, ARCx (old) faces technical, market, and regulatory risks. Its success will depend on the widespread adoption of DeFi credit scoring, protocol security, and effective community governance. For anyone interested in the project, it is strongly recommended to conduct thorough research, review the official whitepaper and latest materials, and fully understand the risks involved. The above content does not constitute any investment advice.