The problem Pawtocol solves

Decentralized lending protocols today rely on a one-size-fits-all model that depends almost entirely on over-collateralization. Borrowers are typically required to lock 150% or more of the loan value, regardless of their past behavior, reliability, or activity onchain. This makes borrowing capital-intensive and inaccessible for many users.

At the same time, DeFi already generates rich behavioral data such as transaction history, repayment patterns, protocol interactions, and wallet longevity. However, this data is not used in lending decisions because there is no trustless and privacy-preserving way to verify it. As a result, DeFi lacks a native credit system.

This leads to poor capital efficiency, under-utilized liquidity, and limited lending growth. Responsible users gain no advantage, while lenders are forced to rely solely on excess collateral for risk management.

Pawtocol solves this by introducing onchain reputation as a credit primitive. Pawtocol enables credit-aware decentralized lending that improves capital efficiency without introducing trust assumptions or sacrificing decentralization.

Challenges we ran into

Development — Alchemy Integration

Integrating Alchemy’s onchain data and reputation signals into a real-time credit system introduced several challenges:

1. Data Normalization & Consistency
   Alchemy provides rich onchain data across multiple dimensions, but transforming raw activity into consistent, credit-relevant signals required additional abstraction and filtering.
2. Latency & Real-Time Constraints
   Credit scoring and lending decisions require near real-time updates, while onchain data indexing and retrieval are not always instantaneous.
3. Mapping Onchain Behavior to Credit Logic
   Translating transactional data into quantifiable credit impact (risk weighting, score adjustment, collateral modifiers) required iterative modeling.

How We Addressed It

1. Built an intermediate reputation abstraction layer
2. Defined credit-relevant behavioral metrics
3. Implemented staged scoring (offchain aggregation → onchain commitment)
4. Designed extensible interfaces for future data sources

This challenge validated Pawtocol’s approach —
building credit infrastructure is fundamentally harder than building a lending app.