Liquidation Rate by Number of Loans
October 10th, 2024
History shows that nearly 1 in 4 loans on-chain will have at least 1 liquidation event within the first 12 months of opening the loan.
The observed liquidation rate is significantly higher than in traditional asset-backed finance. However, its impact on users is relatively minimal. Instead of assets being repossessed, the collateral is only partially reduced.
Interestingly, loans on-chain displays similar behaviour to traditional finance loans insofar as rank ordering performance by sophistication, time on book, affluence, etc. The graph below illustrates the liquidation rate by the number of loans a user had.
These insights are applied in Blockchain Bureau's credit score suite and allows credit houses to effectively manage their credit risk.
Blockchain Bureau's credit suite is a major step in protecting the user's assets.