The blockchain technology can be applied to many industries and many specific applications.
The Royal Bank of Canada thinks the Blockchain technology can improve the credit rating system, since it would use more data and everything modifying the credit rate would be recorded.
Thursday, the bank issued a patent application , in which it explains that the platform built on the blockchain would automatically give a credit score to a borrower with its past credit history and predective data.
Since every transaction is recorded in real-time, it is impossible to alter the data on the blockchain.
The release also expressed that the immutability of the blockchain will ameliorate the loan process because credit rates would be determined from a bigger amount of data than what the current credit rating systems are utilizing.
The patent application mentioned that the new system would bring more transparency since borrowers would be able to see exactly how their ratings are evaluated.
The filing also expressed it will be easier to increase its credit score with the new system.
RBC’s patent application explained,
“In another aspect there is provided a system for credit and digital identity records with a distributed ledger of a plurality of nodes, each node including at least a computing device, and the distributed ledger having a plurality of blocks, each block comprising identification data linked to a set of identifiers for an individual, transaction data, a timestamp indicating when the block was created, and a hash reference for the distributed ledger.”
The Blockchain technology would automatically know what type of loan the creditor asks for, when an application would be submitted, and would automatically create a smart contract including the terms of the deal.
According to the document, a system built with the Blockchain technology would bring more transparency to the system since it would run autonomously going through the whole process of credit rating.