Starfish is offering a service for borrowers and lenders based around a personal credit rating. For borrowers, the cost to obtain a rating is 5BTC. For lenders, the cost is zero.
To obtain a rating I'll look into the usual stuff I do when assessing a loan. This will include asking for personal information, and before the anonymity brigade get all up in arms, this is about money so get over it (otherwise it may as well be a donation).
Over the past year I have had the pleasure to deal with a lot of very good people in the lending section (the majority), and the displeasure of dealing with some scumbags (the minority). A little while I ago I introduced a rating system for deposit takers to help identify some of the risk/return trade-offs and that is still a work in progress.
I have also been approached (and I also check with) other lenders when asked for a loan. I have also been asked by some people about an individual "credit rating" system and I've tossed around various ideas for a few weeks. The piece that I was missing was related to the dual questions of:
Borrower: "why should I get a Starfish rating?" and
Lender: "why should I trust a Starfish rating?"
My answer to that is to back the ratings with cash.
If I rate someone and they default on a loan, I offer to take over the loan at the percentages given in the table below. The offer is only good for one-time per rated person, and excludes interest. That is a sensible thing to do to prevent various games being played. Also, loans need to be reasonably well documented, because successful loans can be used by borrowers to improve their Starfish rating, and if a lender wishes to cash-in the guarantee, they need to have documentation as well.
| 1 Starfish | Bad Risk | up to 10BTC paying 50% for first claim |
| 2 Starfish | - | up to 25BTC paying 60% for first claim |
| 3 Starfish | - | up to 100BTC paying 70% for first claim |
| 4 Starfish | - | up to 250BTC paying 80% for first claim |
| 5 Starfish | Trusted | up to 1000BTC paying 90% for first claim |
some questions you might be askingWhat if someone defaults?Obviously a defaulted loan gets a special score of zero.
Why should I pay 5BTC to you? 5BTC is a lot!You don't have to pay. 5BTC helps sort out those serious about getting a loan from those opportunistic people wanting to scam lenders. Also, it helps cover the insurance default costs, and the cost of running the scheme.
I got a lousy score - you did it wrong/I disagree with you/I want my money backTough - this is designed to weed out bad risk people. If you're paying to get a rating and it comes out bad, you must have something to cause it, and I'll probably tell you why. I'm backing my own money on this so if you do default, I carry the risk.
User XYZ got a X-Starfish rating - mine is lower, and I'm better than them. Why/it's not fairYou'll probably never know and fairness is subjective. The information held on the people being rated will not be disclosed other than their rating.
I've done X-thousand of bitcoin business with you or XYZ, why do I need a credit rating?You probably don't. I have customers I'll lend 1000 coins to on the basis of past performance and recommendations from people that have extended large loans as well.
Lender XYZ is demanding I get a credit rating, but I don't have 5BTC and it's unfair.Look for another lender, one prepared to take on a different level of risk. This isn't a compulsory scheme, just one that is available.
Lender XYZ makes terrible loans - won't that drive you out of business?I'm covering my ass by doing due diligence on the borrower first.
