A blockchain is a distributed ledger in which any computer that is part of a network can participate. For data to be updated on the blockchain, they require verification from multiple sources. A main benefit of the blockchain network is that it lacks centralized points of vulnerability for hackers to exploit, reducing cybersecurity risks.
Blockchain security methods use encryption technologies. This feature enables blockchain technology to provide a much higher level of security in storing information (“What Is a Blockchain?” 2018).
Several financial technology providers have leveraged this process to provide users a more secured means to retrieve their credit score, as well as share credit history with CSPs. Decentralized credit scoring takes thousands of features of a user’s credibility from multiple data sources, while credit scores are calculated via decentralized credit scoring algorithms.
The features may consider data from social media to online shopping history to create a universal digital identity and a comprehensive credibility profile owned by the individual. However, blockchain is not yet widely adopted for credit scoring. A significant issue with blockchain is that there is yet no significant scalability and that the costs per transaction tend to rise steeply.